GBPJPY has formed lower highs connected by a falling trend line on its 4-hour chart, and it looks like another test of resistance is due. The Fibonacci retracement tool also highlights an area of interest that’s being tested.

In particular, the 61.8% Fib lines up with the broken support around the 191.00 major psychological mark near the trend line and 100 SMA dynamic inflection point. If this is enough to keep gains in check, GBPJPY could resume the slide to the swing low at 187.20 or lower.

A break above the area of interest, on the other hand, could signal the start of a reversal for the pair. However, the 100 SMA is still below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse.

Stochastic is already approaching the overbought region to indicate exhaustion among buyers, so turning lower would signal a return in selling pressure. RSI has a bit more room to climb before reaching the overbought area, so the correction could keep going until that happens.

GBPJPY appears to be drawing support from improved risk sentiment related to tariffs announcements, as the Trump administration has given in to some concessions after dialogue with the US trade partners. For now, however, there are still market jitters surrounding his announcement of 25% tariffs on steel and aluminum imports starting March 4 with no exemptions.

The UK has its GDP report coming up later in the week, and the outcome could shape BOE policy expectations. In particular, strong growth readings could undermine the central bank’s dovish tilt in their latest policy announcement while weak data could reinforce expectations for more aggressive rate cuts.

Expectations are for a 0.1% monthly growth reading for December, but the quarterly figure is slated to show a contraction of 0.1%.