• GBP/JPY pares losses and reaches 170.00 area.
• Breach of 170.00 might drive the pair to 175.00.
• Downside attempts remain limited above 168.00.

The pound rallied across the board on Tuesday, fuelled by the market enthusiasm about the victory of Rishi Sunak in the Tory race to Downing Street. The GBP/JPY has extended its rebound from levels right below 168.00 earlier today to scratch the door of 170.00 which might activate an inverted “Head & Shoulders” pattern, driving the pair to the 175.00 area.

Technical indicators show the pair biased higher, supported above the 50 and 100-period SMA in the 4-hour chart. The RSI, however, is approaching overbought territory suggesting that bulls might take a pause.

Downside attempts remain limited above 167.75/168.00 where session lows meet the 50-period SMA. Below here, the next downside targets would be at 165.25 (October 14 and 21 lows) and 162.45 (October 13 lows).

GBP/JPY 4-hour chart

Technical levels to watch