GBPJPY has been selling off recently but is currently testing support at the descending triangle pattern visible on its 4-hour chart. Price seems to have found a floor at the 130.00 major psychological level and could be due for a move up to the resistance at the 134.50 minor psychological level.
However, the 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. If so, a break below the descending triangle support could be seen, taking the pair lower by around a thousand pips or the same height as the chart formation.
Stochastic is on the move up to show that bullish momentum is in play. If the rally is weak, price could encounter resistance around the middle of the pattern or the dynamic inflection points around the moving averages.
Economic data from the UK was stronger than expected yesterday, with the manufacturing PMI up from 53.4 to 55.4 to show a stronger pace of industry expansion. This was higher than the consensus at 52.1. UK construction PMI data is due today and a dip from 49.2 to 49.1 is eyed while Wednesday’s services PMI release could see a fall from 52.9 to 52.1.
It appears, however, that the confirmation that Article 50 would be invoked by the British government by the first quarter of next year has resulted to a fresh wave of uncertainty for the British economy. Prime Minister Theresa May has mentioned that the UK could leave the single market and pursue trade ties with other nations instead.
As for the Japanese yen, data has also been mostly weaker than expected, with the Tankan figures released over the weekend reflecting declines in both manufacturing and non-manufacturing sectors. Japan’s consumer confidence index is due today and a drop from 42.0 to 41.8 is eyed.
By Kate Curtis from Trader’s Way