GBP/JPY Price Analysis: An inverted hammer on top keeps GBP bulls at bay

• In the FX market, the market sentiment favors risk-sensitive currencies, like the British pound.
• GBP/JPY recovered from five-week lows, gaining almost 200 pips in the week.
• GBP/JPY has an upward bias, but an inverted hammer at the end of an uptrend keeps buyers on the sidelines.

The British pound rebound from five-week lows around 152.00s, climbs during the day, trading at 154.28 at the time of writing. At press time, the market sentiment is mixed, though slightly improved. Asian equity futures advances firmly, except for Chinese ones. In the FX market, risk-sensitive currencies extend Thursday risk-on appetite with the AUD, the NZD, and the GBP, gaining. 

On Wednesday, the GBP/JPY pair remained subdued within the 153.70-154.00 range. Nevertheless, as the European session began, the cross-currency edged higher, as positive market sentiment surrounded the financial markets at that moment. In fact, risk-sensitive currencies appreciated the most against the greenback. The only safe-haven currency that printed gains was the Swiss franc.

GBP/JPY Price Forecast: Technical outlook

In the daily chart, the GBP/JPY has an upward bias, though it will find strong resistance at the 154.74 November 17 high that retreated toward current levels. Further, the price action of the abovementioned date depicted an inverted hammer, which usually is a bearish signal if it appears at the end of an uptrend. 

However, to confirm its validity, it needs a daily close, below the November 16 low at 154.17. In that outcome, it would expose crucial support levels. The first would be the 50-day moving average (DMA) at 153.39, followed by the 100-DMA at 152.57. A break of the latter would expose the 200-DMA at 152.24, the last line of defense for British pound bulls.

On the flip side, if GBP bulls accomplish a daily close above the high of the inverted hammer around 154.70s, that could open the door for further gains. The first resistance would be 155.00. An upside break would expose the November 4 high at 156.24.