GBPJPY Descending Channel (Nov 11, 2016)
GBPJPY has staged a strong rally recently but is currently hitting the ceiling at the top of its descending channel pattern visible on the 4-hour chart.
If this area keeps gains in check, price could head back towards support at the 122.00 area or at the mid-channel area of interest at 127.00.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages is narrowing so an upward crossover might be due, possibly leading bullish pressure to pick up.
Stochastic is indicating overbought conditions, which suggests that buyers are exhausted for now. Selling momentum could return if the oscillator turns down from the overbought zone soon.
Sterling has been one of the stronger performers recently, as the pickup in risk appetite has allowed pound pairs to bounce off their lows. This has also forced the safe-haven Japanese currency to return its recent gains, with traders deciding to stay optimistic about global economic prospects.
Economic data from Japan has been in line with expectations today, as the tertiary industry activity index showed a 0.1% drop for September after staying flat in the previous month. There are no other reports due from Japan today so risk sentiment and profit-taking might push yen pairs around.
There are no reports due from the UK today as well. Several banks are closed for holidays so liquidity is thin, which could present opportunities for more volatile price action.
By Kate Curtis from Trader's Way