- GBP/JPY extended strong follow-through traction for a second consecutive day on Tuesday.
- A meaningful move up through the 61.8% Fibo. level points to more upside.
- Overbought conditions on the hourly chart should provoke caution in aggressive buyers.
GBP/JPY saw dip-buying around138.15 region on Tuesday and extended Monday’s 300 pip gains. Strong momentum for the second consecutive session pushed the pair to a two-month high in the European session on Tuesday.
Optimism over the COVID-19 vaccine and hopes that a Brexit trade deal will be agreed saw investors push back the expectations of negative BoE interest rates to June 2021. The Pound saw a strong round of short-covering as a result.
GBP/JPY has now advanced beyond the 61.8% Fibonacci level of the 142.72-133.05 downfall. This coupled with the breakthrough of an almost one-month-old descending trend-line resistance, sees a set-up which favours buyers supporting the prospects of additional gains.
Technical indicators on intraday charts are showing overbought conditions, aggressive buyers should be cautious.and perhaps wait for near-term consolidation, or a pullback to the 139.00.before placing any buy trades..
GBP/JPY looks set to pass the key 140.00 psychological mark and target resistance around 140.65-70 . Any follow-through buying could lift the pair towards 141.00 before resistance at 141.30-35.