• The British pound gave back Monday’s gains amid a risk-on market sentiment.
• A positive market mood failed to underpin the GBP/JPY cross currency.
• GBP/JPY Price Forecast: Upwards, but a bearish engulfing candlestick pattern looms.

GBP/JPY erases Monday’s 300 plus pip rally gains and is set to form a bearish engulfing candlestick pattern, which means that the pair is about to be under downward pressure. However, a daily close below 160.87 is needed to confirm its validity. At the time of writing, the GBP/JPY is trading at 161.01.

The market mood has improved since the mid-European session, as European and US equity indices reflect. Discussions between Russia and Ukraine seem to progress. Latest developments in Eastern Europe suggest that a Putin – Zelenskiy meeting would likely happen, as Ukrainian presidential advisor Podolyak said, according to a CNN reporter via Twitter.

Overnight, the GBP/JPY clung to the 50-hour simple moving average (SMA), followed by a slump during the European session, which carried on to the North American one, witnessing a daily low at 160.25.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY retreated below 161.00, but the bias remains upward. Nevertheless, if the GBP/JPY records a daily close below 160.87, it would form a bearish engulfing candlestick pattern, suggesting that downward pressure is mounting on the GBP/JPY.

If that scenario plays out, the GBP/JPY first support would be 160.00. Once cleared, the next demand zone would be March 23 daily low at 159.03, followed by 158.00.

Otherwise, the GBP/JPY first resistance would be 162.00. Breach of the latter would expose March 29 daily high at 162.71, followed by 163.00 and then 164.00.

Technical levels to watch