Guppy sold off sharply upon testing the channel resistance on its 4-hour time frame and is now hovering around support. A bearish flag pattern can be seen so a continuation of the move could lead to a break below the channel support around 139.00.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the 200 SMA dynamic resistance lines up with the top of the channel, adding to its strength as a ceiling. Stochastic is heading south to show that sellers are still in control of GBPJPY price action.
Bearish pressure could stay in play for the pound now that the UK elections have resulted in a hung parliament, which is a more politically unstable position compared to a few months back. This could weaken the government’s negotiating stance during Brexit talks and PM May seems to be scrambling to fix the situation.
This week, there are a number of top-tier releases lined up from the UK, namely CPI, retail sales, jobs data, and the BOE decision. As for the yen, the BOJ has its policy decision scheduled on Friday so there may be volatility from that end as well.
By Kate Curtis from Trader’s Way