GBPJPY has been trending lower on its 1-hour chart, moving inside a descending channel formation.

Price is currently testing the resistance and could be due for a move back to support around 140.50.

The 100 SMA is below the longer-term 200 SMA on this time frame, indicating that the path of least resistance is to the downside. In addition, the 200 SMA coincides with the channel resistance, adding to its strength as a ceiling.

Stochastic is already hovering around the overbought zone to indicate that buyers are tired from the rally and that sellers might take over. On the other hand, if bulls stay in control, a break past the resistance at 143.50 could mark the start of an uptrend.

Economic data from the UK showed a bit of a slowdown, with the manufacturing PMI down from 57.3 to 56.7, just slightly above the consensus at 56.5. Nationwide HPI showed a 0.2% drop in price levels versus the projected 0.2% uptick.

In Japan, reports have printed stronger than expected results. Capital spending is up 4.5% versus 3.9% in the first quarter while the final manufacturing PMI was upgraded from 52 to 53.1 to reflect a stronger pace of industry expansion.

Japan’s consumer confidence index is due next and an improvement from 43.2 to 43.6 is expected. In the UK, the construction PMI is due and a drop from 53.1 to 52.7 is eyed.

By Kate Curtis from Trader’s Way