The short-term selloff on GBP/JPY may soon be over, as a classic reversal chart pattern has formed on GBP/JPY’s 1-hour time frame. A double bottom can be seen after the pair tested the support around 167.75 a couple of times then found resistance near 169.50.

The pair has yet to break above the neckline of the pattern before confirming that an uptrend is in the cards. Stochastic has reached the oversold zone and turned upward, indicating that bulls might be in control in the near term.

If that’s the case, GBP/JPY could climb by more than 150 pips upon breaking above the 169.50 neckline. A stronger rally could take it all the way up to the former highs near the 173.50 minor psychological level. On the other hand, pound weakness could trigger another test of the lows at the 167.75 area.

By Kate Curtis from Trader’s Way