GBPJPY Potential Range Breakout

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GBPJPY has been moving sideways since the previous week, finding support around 142.50 and resistance close to the 143.50 minor psychological mark. Price is testing resistance and could be due for a move back to the bottom of the range.

RSI is heading higher but already seems to be topping out to signal that buyers could use a break and let sellers take over from here. Stochastic is in the overbought region to signal exhaustion among buyers and could be turning lower to suggest that bearish pressure might pick up.

However, the 100 SMA is still above the 200 SMA to indicate that the path of least resistance is to the upside. In other words, resistance is more likely to break than to hold. If that happens, GBPJPY could be in for a rally that’s the same height as the range or 100 pips.

Data from the UK turned out weaker than expected as headline CPI slipped from 1.5% to 1.3% instead of holding steady as expected. Core CPI was also weaker than expected as the figure fell from 1.7% to 1.4% instead of also holding steady.

Still, GBPJPY was able to recover after the selloff as the yen is also on weak footing. Note that BOJ Governor Kuroda said that he’s open to the idea of further easing if inflation doesn’t pick up in Japan. This could keep a lid on yen rallies, especially since the BOJ decision is coming up later this month and might feature an actual move by the central bank.

The improvement in risk appetite is also dampening gains for the lower-yielding Japanese currency and might continue to do so as geopolitical risks fade. For one, Middle East tensions seem to be retreating while the signing of the Phase One of the US-China trade deal is also keeping risk appetite supported.

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