GBP/JPY Price Analysis: Breaks through a three-day-old ascending channel hurdle

GBP/JPY gained some positive traction for the third consecutive session on Wednesday.
The momentum pushed the cross further beyond a three-day-old ascending channel.
The lack of follow-through, overbought RSI on the 1-hourly chart warrant some caution.

The GBP/JPY cross edged higher for the third consecutive day and jumped to near one-week tops, around the 136.45 region during the mid-European session on Wednesday.

The latest leg of a sudden spike in the last hour could be attributed to some technical buying on a sustained move beyond the top end a three-day-old descending channel. This comes on the back of the early resilience below 100-hour SMA and supports prospects for further intraday gains.

However, the lack of any strong follow-through buying questions the reliability of the breakout. This coupled with the fact that RSI (14) on the 1-hourly chart has just moved above the 70 mark further warrants some caution before placing any aggressive bullish bets, at least for now.

Hence, it will be prudent to wait for some follow-through buying beyond last week’s swing high, around the 136.50-60 region, above which bulls are likely to aim to reclaim the 137.00 mark. The positive momentum could further get extended towards the 137.20-25 horizontal resistance.

On the flip side, the 136.00 round-figure mark now seems to protect the immediate downside and is closely followed by support near the 135.70 region (100-hour SMA). Failure to defend the mentioned support levels will negate any near-term bullish bias and prompt some fresh selling.

The cross might then accelerate the slide further towards the lower boundary of the mentioned channel, currently near mid-135.00s. Some follow-through selling will be seen as a fresh trigger for bearish traders and set the stage for a fall towards challenging the key 135.00 psychological mark.