GBPJPY has been trending lower on its 4-hour chart, moving inside a descending channel pattern. Price is testing the resistance, which appears to be holding as it lines up with the dynamic inflection point at the 200 SMA.
The 100 SMA is below the 200 SMA so the path of least resistance is still to the downside. Also, RSI is heading down to indicate that sellers are in control of price action while stochastic is also indicating the presence of bearish momentum.
This could lead to a test of support at the previous lows near 155.00 or at the bottom of the channel closer to 150.00. Of course this hinges on the outcome of this week’s central bank statements.
Earlier today the BOJ announced its decision to keep monetary policy unchanged after just having implemented negative deposit rates in their previous statement. The press conference is still coming up so there might still be some room for volatility.
Later on the UK jobs report is up for release and a 8.8K drop in claimants is eyed, possibly enough to keep the unemployment rate steady at 5.1%. The average earnings index is slated to improve from 1.9% to 2.0% which might keep the pound supported, but downbeat results could allow the selloff to resume.
The BOE is also set to announce their monetary policy decision this week and another downbeat statement is expected. The minutes of their meeting are also due and a unanimous vote to keep rates on hold could put downward pressure on the pound. Additional dovish remarks could lead traders to delay rate hike expectations until much later this year, and any hints that the central bank is also worried about a Brexit could add to bearish momentum.
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