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The GBP/JPY exchange rate has reached a critical area according to analyst Richard Perry of Hantec Markets. Key to the outlook is how the pair resolves a 138.85/139.7 band of resistance.
It is interesting that a sterling rally is beginning to hit the buffers on GBP/USD, but this also comes where Sterling/Yen is hitting important resistance.
On the Pound-to-Yen exchange rate the trading band between 138.85/139.75 was an old range support in Q4 2019 that restricted the June rally.
Now we see this latest rally into the band of resistance but again beginning to struggle.
Yesterday’s negative candle was the second successive close lower, with a session failure at the 138.85 resistance but also comes at a point where the RSI is tailing off over 70 (again similar to the June rally high). It is still early days though in calling for a correction.
The Stochastics are crossing lower, but would only really confirm a corrective signal on a move into the low 60s, whilst MACD lines are still rising.
Essentially, with the acceleration higher over the past week now faltering, this could be the latest set up for a slide back towards the uptrend that has been in place since March (comes in around 134.80 today).
A move below initial support at 137.70 would begin to see the retracement set in at least towards the mini breakout 136.60. The bulls will still have designs on breaking through the ceiling of resistance though.
A close above 139.75 would be the break to open the upside for the next key resistance band at 141.00.
The caveat is the market consolidating at a key crossroads ahead of the Bank of England on Thursday.
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