GBPJPY has been trending higher on its short-term time frames, moving inside an ascending channel on its 1-hour chart. Price just bounced off resistance and could be due to test support at the 149.00 major psychological level.
This potential floor lines up with the 61.8% retracement level and the 200 SMA dynamic inflection point. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is the upside, which means that the rally is more likely to resume than to reverse.
Stochastic has already pulled up from the oversold region to signal a return in bullish momentum but is turning back down to indicate that sellers are putting up a fight. However, the 100 SMA is also holding as dynamic support so far and might be enough to push price back to the swing high or channel resistance.
Yen weakness has been in play since the Japanese elections over the weekend as the victory for PM Abe and his political party meant the likely implementation of another tax hike in 2019 and the continuation of the BOJ’s easy monetary policy. However, dollar weakness as also been in play recently, buoying the yen higher in effect.
As for the pound, the only piece of data released so far was the CBI industrial order expectations index which fell from 7 to -2 instead of improving to 9. Brexit concerns are also lurking and any negative updates could weigh heavily on the currency.
Up ahead, the UK preliminary GDP is due and analysts are expecting to see another 0.3% growth figure. Stronger than expected data could assure traders that the economy is staying resilient ahead of Brexit but a downside surprise could undermine confidence. As for Japan, the next set of data isn’t due until Friday and this comprises the national and Tokyo core CPI readings.