GBP/JPY - Off one month lows, what’s next?

GBP/JPY hit a one-month low of 142.13 on Friday before the oversold conditions on the intraday technical charts helped the pair recover to 142.90 levels in the Asian session today.

Lower highs, lower lows established

A lower highs, lower lows/falling channel pattern has been established on the daily chart, courtesy of the pair’s repeated failure to hold above 145.00 levels in the last week followed by a break below 143.34 (May 18 low) on Friday.

The chart pattern suggests the cross could extend the sell-off from the May 10 high of 148.11 levels. The bearish chart pattern goes well with the latest UK election polls, which show a sharp reduction in the Conservative lead.

The downside could be capped by continuation of the risk-on rally in the global equity markets.

GBP/JPY Technical Levels

The cross was last seen trading around 142.85 levels. A break above 143.33 (38.2% Fib R of Apr low - May high) would open up upside towards 144.13 (May 22 low) and 144.51 (May 24 low).

On the downside, breach of support at 142.13 (previous day’s low) could yield a sell-off to 141.85 (50% Fib R of Apr low - May high) and 140.60 (Mar 15 high).