GBPJPY recently had lower highs and found support at the 137.00 major psychological level, creating a descending triangle pattern.
Price just recently broke above the resistance at 139.00, indicating that bulls are taking control of price action. The chart pattern is approximately a thousand pips tall so the resulting breakout could last by the same amount.
However, the 100 SMA is still below the 200 SMA on this chart so the path of least resistance could be to the downside and a pullback to the broken triangle resistance at 138.00-139.00 could take place. In addition, stochastic is turning down from the overbought zone to show that sellers are regaining control of price action.
The outcome of the first round of the French elections turned out positive for European markets, adding to the already strong bullish pressure on the pound spurred by the announcement of the UK snap elections. The main event risk for the pound might be the UK preliminary GDP release later in the week as analysts are expecting to see a slightly weaker 0.4% growth figure.
As for the yen, the BOJ statement could also pose some risks especially if the central bank starts jawboning the yen. After all, a strong currency isn’t good for the country’s exports and domestic inflation so the BOJ might be keen on dampening the yen’s gains.
By Kate Curtis from Trader’s Way