GBPJPY was previously trending higher inside an ascending channel before breaking below support to signal a reversal.

Price bounced off the 148.75 level before showing signs of pulling back to the broken support. 

Applying the Fibonacci retracement tool on the latest swing high and low shows that the broken support lines up with the 50% Fib and the 150.00 major psychological mark. This is also close to the moving averages’ dynamic inflection points. 

However, the 100 SMA is still above the longer-term 200 SMA on this time frame, so the path of least resistance is to the upside until a crossover forms. Stochastic is already indicating overbought conditions to show rally exhaustion and a potential return in selling pressure. 

Yen weakness was in play at the start of the week after the dovish BOJ minutes and speech by Governor Kuroda. Risk-taking also came into play later on in the sessions, further weighing on the lower-yielding yen. 

Meanwhile, the UK BRC retail sales monitor printed a 1.0% decline, erasing part of the previous 1.9% gain. The Halifax HPI is due next and a smaller 0.2% uptick is set to follow the previous 0.8% gain.

Later in the week, Japan will release its data on core machinery orders and the current account balance. The Economy Watchers Sentiment index and the tertiary industry activity index are also on the docket. UK manufacturing production is due on Friday and a 0.3% uptick is eyed. 

By Kate Curtis from Trader’s Way