After breaking below a key support zone around the 182.00 major psychological level and dipping close to 178.00, GBPJPY is showing signs of a forex correction on its 4-hour chart. Price is pulling up to the Fibonacci retracement levels marked on the latest swing high and low and these might hold as resistance before the downtrend resumes.
The 38.2% Fibonacci retracement level lines up with the 181.00 major psychological mark while the 50% forex correction level is closer to the broken support at 182.00. A higher pullback could last until the 61.8% Fib level, which is near the longer-term 100 exponential moving average.
Forex Correction Levels
Stochastic is moving up but is already in the overbought zone, indicating that the climb is about to end soon. Once the oscillator reaches the overbought region and turns lower, price could head south as well.
In that case, GBPJPY might make another move towards the support near 178.00 or perhaps create new lows closer to the 176.00 area. For now, the shorter-term 20 EMA is moving below the 100 EMA, confirming that the path of least resistance is to the downside.
The event risk for this forex correction setup today is the BOJ interest rate statement, with most market watchers expecting to hear downbeat comments from policymakers. The Japanese economy has been printing weak data recently and this might warrant further easing.
However, BOJ Governor Kuroda has been known to stay optimistic and to focus instead on the positive aspects of the economy. He has insisted that no further easing is needed since Japan is able to benefit from the pickup in exports and factory output.
As for the pound, the BOE minutes and the UK claimant count change data are up for release tomorrow and might also be a catalyst for a forex correction. The UK usually prints stronger than expected jobs figures and might chalk up another one for February, which might lead to a strong upside break past the 182.00 resistance. If that happens, a move towards the 185.00 mark is likely.
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