GBPJPY is trending lower inside a falling channel on the 1-hour time frame, and the pair is testing the resistance. Technical indicators suggest that the selloff could carry on.
The 100 SMA is below the 200 SMA to suggest that the path of least resistance is to the downside or that the ceiling is more likely to hold than to break. The 200 SMA also lines up with the channel top to add to its strength as a ceiling.
Stochastic is turning lower from the overbought zone to suggest that sellers are taking over while exhausted buyers take a break. This could take GBPJPY back to the nearby support levels at the channel bottom around 154.00 or the mid-channel area of interest at the 154.50 minor psychological mark.
RSI is already turning lower without reaching the overbought zone to suggest that sellers are eager to take over.
A break past the channel top at 155.00, on the other hand, could spur a reversal from the downtrend.
The latest set of economic reports from the UK turned out mostly weaker than expected, with construction output and industrial production posting surprise declines for the month of April. The GDP also turned out slightly weaker than expected at 2.3% for the same month versus the projected 2.4% expansion.
BOE Governor Bailey has a speech coming up in an online event hosted by the BIS, so any remarks related to monetary policy could lead to a huge reaction for GBPJPY.
Meanwhile, the yen might take cues from overall market sentiment since there are no other major releases coming up. Note that the latest US CPI reading did not spur Fed tightening hopes, which could keep traders hopeful for a longer period of low interest rates.
In turn, this could be positive for investor risk appetite and business activity, which props up higher-yielding currencies versus safe-haven ones like the yen.