GBPJPY broke above its long-term descending channel last September, indicating that a reversal from the downtrend is due. However, price hit a roadblock around the 150.00 mark and has since pulled back for a retest.

If the broken channel top holds as resistance, price could resume its rally to the Fib extension levels next. The 61.8% level lines up with the swing high at 149.00 while the 38.2% level is around an area of interest at 146.70. Stronger bullish momentum could take GBPJPY up to the 78.6% extension at 150.71 or the full extension at 152.85.

However, the 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. In other words, the selloff could still resume from here. A candle closing back inside the channel around the 142.00 levels might be enough to confirm that sellers are back for the long haul.

Stochastic is already indicating oversold conditions, though, which means that pound bears are tired. Turning higher would indicate that buyers are taking over and that a bounce off the current levels is due. RSI is still heading south so price might follow suit, but the oscillator is also nearing oversold levels.

The pound has been under pressure in the past weeks due to the lack of progress in Brexit talks. Neither the EU nor the UK are willing to give in to key demands in the Irish border, increasing the odds of a “no deal” Brexit. Banks are already told to prepare enough liquidity for the worst case scenario in which the UK loses access to European markets without any agreements in place.

The BOE decision could turn things around this week, although it’s hard to imagine how their statement could be anything but somber. The BOE Inflation Report is also due and downgraded forecasts on account of Brexit uncertainties might be seen. The BOJ has a rate statement as well but no monetary policy changes are eyed.