A flag consolidation is now in play just as it looked like the pair could head to 140.00

GBP/JPY trades 0.17% higher at the beginning of the week.
The part has now produced a consolidation pattern after rallying heavily.

GBP/JPY 4-hour chart

GBP/JPY has rallied significantly over the last few months. The pair moved from a low of 131.78 in June to a high of 139.23 last week. The main bulk of the move was made in July during the phase of USD weakness. In this time GBP strengthened and USD/JPY stalled for the most part.

Now there is a consolidation phase the price has converged into a flag pattern. The top of the consolidation is hovering at 139.23 and the low is at 137.75. A break in either direction could tell us about the future trajectory of the pair.

On the downside, the main support area is at the green line near 136.50. It has been used as both a support and resistance zone on the chart and this means it could be significant in the future. On the topside, the previous high at 139.74 is the main target for the bulls and a break of this level would surely see the trend continue.

The indicators are looking pretty bearish. The MACD signal lines are breaking to the downside and the Relative Strength Index is tilting lower. For this pair, much will depend on the jobs figures and the GDP. This is a significant week for data in the UK and it could shape how GBP/JPY for the rest of the week, including the direction of the pattern break.