GBP/JPY is expected to trade with bearish bias as the key resistance at 127.35. The pair shows further downside potential after it failed to break above its key resistance at 127.35. The declining 50-period moving average is also playing a resistance role and suggests that the pair still has potential for a further drop. The relative strength index is below its neutrality level at 50 and lacks upward momentum. The British pound dropped to a low of 1.2081 to the U.S. dollar, the lowest intraday level since the "flash crash" on October 7, before paring some losses following Carney's comments. In his testimony to the House of Lords Economic Committee, Carney pointed out, "The balance of supply and demand in the exchange rate can shift, and we're not a targeter of the exchange rate, we're a targeter of inflation. But we're not indifferent to the exchange rate. As I've tried to make clear, that perception may well be mistaken, what we have to address as a committee, what we have to take into account as a committee is where sterling is and how persistent it likely is to be".
As long as 127.35 is not broken, look for further drop toward 126.55 and even 126.10 in extension.
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 126.55. A break below this target will move the pair further downwards to 126.10. The pivot point stands at 127.35. 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 127.70 and the second one at 127.95.
Resistance levels: 127.70, 127.95, 128.15
Support levels: 126.55, 126.10, 125.25
The material has been provided by InstaForex Company - www.instaforex.com