The British pound fell down against the Japanese yen on Monday taking the price of GBP/JPY to less than 182.60, following the Britain’s PMI figure. The technical bias however is bullish because of higher lows on the daily chart.
As of this writing, the pair is being traded around 183.99 a few pips below the opening price (184.38) and is now struggling to break the December low. The market is overwhelmed with the bearish pressure since start of the day. From the opening price, the pair could only go up to the 184.43 high. On the upside, an immediate resistance can be noted around 184.59, the 23.6% Fib level of the last leg from 168.01 low to 189.71 high. There lies a major resistance around 187.52, the level that has been restricting the price since December. Success in breaking these levels will eventually make the pair to test 189.71, the December high.
On the downside, a major support can be noted around 181.42, the 38.2% Fib level. The said level supported the pair on various occasions in the month of November. On breaching this level, the pair may move down further to test the support around 178.86, the confluence of 100-Day SMA and 50% Fib level, as demonstrated in the above chart.
The bullish bias however will prevail as far as the support area around 168.00 is intact.
The Britain construction PMI remained 57.6 points in December, a bit below than 59.4 points in the month before, missing the average forecast of different economists which was 59.0 points. Generally speaking a higher and over 50 figure is considered bullish for the British pound and vice versa. Thus a worse than expected figure spurred renewed selling interest in the price of GBP/JPY.
BOJ Monetary Base
The monetary base as released by Bank of Japan remained at 34.3% this December below than 36.7% in the month before, says the median projection of different analysts. Generally speaking, an accelerated monetary base is seen as bullish for the Japanese yen and vice versa. Thus a better than expected outcome will generate selling pressure in the price of GBP/JPY.
Considering the overall technical and fundamental analysis, buying the pair is preferred if the price leaves a bullish pin bar or engulfing pattern on the daily chart.