In today's technical analysis, let's take a closer look at the British Pound to Japanese Yen (GBP/JPY), which is positioned at a technically critical juncture.
The yellow horizontal resistance level, established in March and April, was recently breached to the upside. However, the breakout was short-lived. The move above this key level—now marked with a red rectangle on the chart—has turned into what looks like a false breakout, as the price quickly retreated below.
Currently, that former support level is being retested as resistance. Adding to the bearish tone is the formation of a double top pattern this week: the first peak occurred on Monday, and the second followed on Tuesday. This classic reversal pattern indicates weakening bullish momentum.
However, for a proper sell signal to be triggered, the price needs to break below the orange neckline of this double top formation. A daily close beneath that level would activate the bearish scenario, with the next target being the black uptrend line, which connects higher lows and could act as the next support.
On the other hand, as long as the price remains above the neckline, buyers still have a chance to reverse the short-term bearish pressure and resume the uptrend.