GBPJPY has formed lower highs and lower lows, moving inside a descending channel on the 1-hour chart.

Price is currently approaching the resistance at the 140.00 major psychological level and if this keeps gains in check, the pair could head back to the channel support at the 138.00-138.50 area.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the two is widening, which means that bearish pressure is getting stronger. Stochastic is already in the overbought zone, which indicates that buyers are exhausted, but the oscillator has yet to cross down to reflect a return in selling pressure.

The Japanese yen could benefit from a return in risk aversion, although it is currently being weighed down by the pickup in dollar demand. However, European currencies are currently enjoying some support after the ECB statement presser as the central bank upgraded growth and inflation forecasts while Draghi admitted that there’s no more urgency to ease.

In the UK, the RICS house price balance showed a 24% increase versus the projected 23% gain. UK manufacturing production is due today and it could show a 0.6% decline, erasing part of the earlier 2.1% increase. Industrial production could dip by 0.4% after rising by 1.1% in the previous period.

The US NFP report could provide some volatility for this pair today as the results would likely have a strong impact on USDJPY. If it sparks profit-taking ahead of the weekend and the Fed meeting next week, JPY could benefit and this pair could head back down.

By Kate Curtis from Trader’s Way