GBPJPY sold off from its ascending triangle resistance once more, making its way down to the bottom of the formation at the 157.00 levels. Price could be due for a bounce or a break, with technical indicators suggesting that another move to resistance might be seen.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. This could take GBPJPY back up to the top of the triangle at the 163.00 handle. However, a break lower could result in a drop to the bottom of the pattern at 151.00 or a 1,200-pip downtrend, which is the same height as the chart formation.
Meanwhile, stochastic is already indicating oversold conditions so sellers may be feeling exhausted and willing to let buyers take over. RSI is also in the oversold area but hasn’t turned higher, suggesting that there’s some bearish pressure left.
Brexit survey results have been weighing on the UK currency lately, as some have indicated a lead in favor of those voting to exit the EU. This would open more economic and financial uncertainty for the UK economy, not to mention a potential year-long recession and a likely drop in employment.
Economic data has actually been upbeat, as the UK manufacturing PMI climbed from 49.4 to 50.1, reflecting a return to industry expansion. The construction PMI is due today and a dip from 52.0 to 51.9 is eyed while tomorrow’s services PMI could show a rise from 52.3 to 52.5.
As for the yen, news that PM Abe has decided to delay the sales tax hike is supporting the currency on hopes of stronger consumer spending and price pressures for a few more years. However, this could wind up hurting the government’s chances of achieving its fiscal targets and put the country at risk of a credit rating downgrade.
By Kate Curtis from Trader’s Way