GBPJPY seems to be having trouble extending its climb past the 188.00 major psychological resistance level, opening up the possibility of a large correction to the areas of interest. 

On its 4-hour chart, it can be seen that the long-term EMA has acted as dynamic support in the previous pullback and may do so again.

Price could retreat to support at the 184.00 major psychological level, which lines up with a broken resistance area and the long-term exponential moving average. Stochastic is nearing the overbought area, which suggests that bearish pressure might push the pair lower from here.

The short-term EMA is still treading above the long-term EMA, indicating that the uptrend is likely to stay intact. If so, another move towards the resistance at 188.00 is possible and a potential breakout could be seen if buying pressure escalates.

Event risks for this trade setup include the release of the BOE meeting minutes later on in the week, as this is expected to shed light on the central bank’s economic assessment and outlook. Earlier in the week, UK CPI came in weaker than expected and put the country in deflation.

Hawkish remarks from BOE policymakers assuring that the next step is still a rate hike could be enough to keep the pound on its uptrend. On the other hand, cautious comments could push for a sharper correction on the longer-term time frames. 

By Kate Curtis from Trader’s Way