Price is trading in between near-term support and resistance levels
As the sterling crashed and burned yesterday following the soggy UK inflation report, price fell below the 200-hour MA (blue line) and tested below the 38.2 retracement level @ 147.21 but ultimately buyers stepped in on a test of the 10 July support @ 146.92.
The pair has subsequently tracked higher but ran into resistance at the 13 July low (support-turned-resistance) @ 147.65 and has since moved lower. The yen also benefited a little on the day from the trade balance report earlier here. The report shows that exports grew for a 19th straight month, but there's another reason why yen bears should be worried and I'll get to that later in a separate post. Hint: It's something to do with the US.
Anyway, as for GBP/JPY we're now trading in the middle of key near-term levels but as long as price stays below the 200-hour MA then sellers will stay in control.
Looking at the daily chart:
The recent upside move once again stalled at resistance near the upwards sloping trendline, an area I highlighted here earlier in the week. And with the pair falling and breaking below the 100-day MA (red line) and the 50.0 retracement level @ 147.96, the bias now favours sellers more than it does buyers.
The next key level on the chart is support around the 147.00 figure level (also take into account the 10 July low @ 146.92) with the 61.8 retracement level @ 145.92 next in line. There's a considerable gap in between with little key support areas to be seen.
If that's the case, watch out for support around 146.90-00 as the key level for buyers to lean on. If that fails to hold, then it's a quick ticket down for the pair. The next key risk event will come from the UK retail sales data later today, and that's at 0830 GMT.
