GBPJPY recently broke past a descending trend line visible on its 4-hour time frame and is showing signs of a pullback.

Applying the Fib tool on the latest swing high and low shows that the 50% retracement level lines up with the broken resistance, which might now hold as support.

The 100 SMA is still below the 200 SMA so the path of least resistance is to the downside. However, the 100 SMA is close to the 38.2% Fib and might function as dynamic support. Stochastic is indicating oversold conditions, which means that sellers need to take a break and might let buyers take over.

If so, GBPJPY could resume its climb to the swing high at 144.75 or higher. On the other hand, a break below the lowest Fib at 139.75 could put the pair back on the downtrend.

The BOJ refrained from making any policy changes in their statement today but this comes after a round of bond-buying adjustments last week. Recall that they skipped the schedule to buy short-term maturities while increasing their long-term bond purchases in their attempt to target the yield curve.

Up ahead, the BOE Super Thursday is lined up and this could mean a lot of volatility for pound pairs. Although no actual policy changes are expected from the central bank, the focus will be on Brexit-related discussions and potential adjustments. Traders might also get a glimpse of how policymakers are reacting to Trump’s decisions so far.

Earlier today, Japan reported stronger than expected household spending and preliminary industrial production data, shoring up demand for the yen and underscoring the BOJ’s upgraded growth forecasts in their previous statement. The yen is also drawing support from the selloff in US assets as traders seem to be pricing in additional uncertainty.

By Kate Curtis from Trader’s Way