GBP/JPY is expected to continue its downside movement as the bias remains bearish. The pair broke above its 20-period moving average and is challenging its 50-period one. The relative strength index is bullish above its neutrality level at 50 and is heading upward. Nevertheless, the pair is still capped by a declining trend line (since Oct 10), which maintains the negative view. Additionally, 125.70 is playing a key resistance role, which should limit the upside potential.
The British pound continued to be sold showing difficulties in making a full recovery from last Friday's 10% flash crash. GBP/USD plunged 2.0% on day to 1.2117 (day-low at 1.2086) making up a four-session losing streak that threw away 5.0% or 631 pips, the worst since the Brexit vote in June. Bank of England policymaker Michael Saunders commented, "Given the scale and persistence of the U.K.'s current account deficit, I would not be surprised if sterling falls further, but I am fairly agnostic as to whether any further depreciation is likely."
As long as the declining trend line and key resistance at 127.80 remains intact, we keep our negative view unchanged with down target at 125.70. A break below this level would call for a further decline toward 124.80.
The pair is trading below its pivot point. It is likely to trade in a lower range as long as it remains below the pivot point. Short positions are recommended with the first target at 125.70. A break below this target will move the pair further downwards to 124.80. The pivot point stands at 127.80. In case the price moves in the opposite direction and bounces back from the support level, it will move above its pivot point. It is likely to move further to the upside. According to that scenario, long positions are recommended with the first target at 128.70 and the second one at 130.00.
Resistance levels: 128.70, 130.00, 131.00
Support levels: 125.70, 124.80, 123.40
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