GBPJPY recently bounced off the top of its ascending channel and is now making its way to support. Applying the Fib tool on the latest swing low and high shows that this lines up with the 61.8% retracement level around the 146.00 major psychological mark.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, support is more likely to hold than to break. The 200 SMA is close to the 50% Fib and might hold as dynamic support as well.
Stochastic is already indicating oversold conditions to show that selling pressure is exhausted. Turning higher could draw more buyers back in and lead to a bounce up to the channel resistance or swing high at 156.00.
UK CPI reports turned out stronger than expected this week, with the headline figure steady at 3.0% instead of dipping to the 2.9% consensus and the core figure rose from 2.5% to 2.7%.
Data from Japan was actually weaker than expected since GDP came in at 0.1% versus the 0.2% estimate and the 0.6% earlier expansion. However, the yen has been taking advantage of dollar weakness and enjoying most of the risk-off flows.
UK retail sales data is due on Friday and a 0.5% rebound is eyed after the earlier 1.5% drop. However, weaker than expected reports would show that higher price levels are starting to weigh on consumer spending and potentially overall growth.
By Kate Curtis from Trader’s Way