GBPJPY looks ready to resume its longer-term selloff, as price is completing its retracement on its 4-hour forex chart. 

The pair has recently bounced off support around the 176.00 levels and pulled up to the 50% Fibonacci level on the latest swing high and low.

The 50% Fib might hold as resistance, as this coincides with a broken support level and the 182.00 major psychological level. Stochastic is still pointing up and hasn’t crossed down from the overbought region, indicating that pound bulls are still in control for now.

The 61.8% Fib might act as the line in the sand for any potential rallies, with any gains past this point potentially indicative of a reversal. In that case, price could head further north to the highs around 188-189.00.

If the pair resumes its drop though, GBPJPY could make its way back to its previous lows near 176.00 or perhaps create new ones later on if selling pressure is strong enough. Event risks for this retracement setup this week include the BOE Inflation Report, during which BOE Governor Carney could explain their economic assessment and outlook.

Recall that the BOE is one of the more confident central banks these days, as officials noted that the downturn in inflation might actually help shore up consumer spending. This is because lower prices could improve the purchasing power of individuals, allowing households to stretch their budgets and use more of their disposable income for other purchases.

As for Japan, there are no major reports lined up, leaving risk sentiment as the main driver of yen price action. Data from Japan has been mostly weak recently, as spending and inflation have continued to decline. This could keep the BOJ on the dovish side, which might mean more losses for the yen.

By Kate Curtis from Trader’s Way