The pound has been on a tear in the past few weeks as traders continue to keep hopes up for a soft Brexit or even a second referendum. Parliament has rejected PM May’s Plan B but House of Commons is up for a vote this week on amendments.

GBP/JPY is already testing the 61.8% Fibonacci retracement level close to the top of the channel on the daily time frame. Holding as resistance could spur a drop back to the lows around 136.00 or the channel bottom closer to the 134.00 major psychological mark.

Stochastic is already indicating overbought conditions or that buyers are tired and willing to let sellers take over. However, the oscillator has yet to point down to confirm that sellers are returning.

Meanwhile, the 100 SMA is safely below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the downtrend is more likely to resume than to reverse. The gap between the moving averages is widening to reflect increased selling pressure also.

The pound also drew support from mostly upbeat data last week as wage inflation has shown signs of picking up. This could be highlighted in BOE Governor Carney’s remarks this week as a sign that the UK economy could stay resilient with Brexit.

Still, the clock is ticking for PM May to come up with an agreement that is both amenable to UK lawmakers and the EU. Officials on both sides seem keen on avoiding a hard Brexit so some contentions would have to be made as the exit date draws near. An extension of Article 50 by a few weeks could also give time for negotiations and be seen as a bullish sign for the pound.

With that, a break past the channel top could lead to a reversal from the longer-term downtrend, depending on how Brexit events play out.