GBP/JPY was another inside day on Wednesday which makes for a coiled market that could be about to spring before the week is out.

It was illustrated that the market was an inside day and that there were prospects of a bullish megaphone breakout to the upside if the trendline broke. Instead, the doom and gloom around UK politics and the economy has sunk the pound across the board. There has been a move lower into levels 1 and 2 long positions from the prior day.

While on the backside of the counter trendline, if the 167.50s hold, there could be a move up into the highs for the day to test the commitments of the bears prior to the capitulation of the bulls for a significant sell-off into the rising trend as illustrated in the chart above. 166.43, 165.02 and 162.32 are all key levels on the way down a cascade of market orders.

While failures to successfully cross the 170.00 psychological magnet lures GBP/JPY sellers, a convergence of the 10-DMA and monthly support line, around 165.20, appears crucial for buyers before relinquishing control.

The UK political uncertainty continues to weigh on the British pound, which, in turn, is seen as a key factor exerting some downward pressure on the GBP/JPY cross.

Elsewhere, broadly firmer inflation numbers from Britain, Eurozone and Canada, as well as the hawkish Fed bets and pessimism conveyed by the Fed’s Beige Book, seem to weigh on the market’s risk appetite and the GBP/JPY prices.

GPBJPY Defends 168.0 Price Action

Oct 20 2022