GBP/JPY Price Analysis: Bearish head & shoulders spotted on short-term charts

• GBP/JPY staged a goodish intraday bounce of around 65-70 pips from two-week lows.
• The set-up favours bearish traders and supports prospects for a slide to the 135.00 mark.

The GBP/JPY cross managed to find some support near the 135.60 region and bounced around 65-70 pips from two-week lows set earlier this Friday. The mentioned region marks the neckline support of a bearish head and shoulders pattern on short-term charts.

The formation of bearish pattern supports prospects for an extension of the recent pullback from the 137.80-85 region, or over one-month tops touched last Friday. The bearish outlook is further reinforced by the fact that the GBP/JPY cross has now found acceptance below 100-period SMA on the 4-hourly chart for the first time since September 29.

That said, bearish traders might still need to wait for some follow-through selling below the neck-line support before positioning for any further depreciating move. The GBP/JPY cross might then accelerate the slide further towards challenging the key 135.00 psychological mark before eventually dropping to the next major support near the 134.55 area.

On the flip side, immediate resistance is pegged near mid-136.00s ahead of the 136.75-80 region, which if cleared might prompt some near-term short-covering. The momentum has the potential to lift the GBP/JPY cross further beyond the 137.00 mark and the 137.25-30 intermediate resistance, towards retesting the 137.75-80 supply zone.

GBP/JPY 4-hourly chart

Technical levels to watch