Technical Analysis – GBPJPY nears key support as January's sell-off sharpens

GBPJPY continues to trend southwards so far this month following the peak at a two-month high of 157.75, with the price recently slipping back below its 20-day simple moving average (SMA) to reach a new low at 154.39 on Friday.

The pair is decelerating within the lower bearish Bollinger zone and the momentum indicators are painting a gloomy picture for the short term as the MACD keeps losing ground below its red signal line and the RSI is entering the bearish territory below 50.

Encouragingly, the long-term ascending trendline from March 2020, which managed to add some footing under the price at the end of December, is within breathing distance around 154.40. A rebound here cannot be excluded as the Stochastics are already comfortably below their 20 oversold level. Also, the 38.2% Fibonacci retracement of the 148.96 – 157.75 up leg and the lower Bollinger band are in the neighborhood, increasing the odds for an upside reversal.

Should the bears breach that floor, the pair may weaken towards the 50% Fibonacci of 153.35 and the 50-day SMA. If the 200-day SMA at 153.00 gives way as well, the sell-off may sharpen towards the 61.8% Fibonacci of 151.75.

Otherwise, a bounce on the trendline could initially pause between the 23.6% Fibonacci of 155.68 and the 20-day SMA slightly above at 155.91 before it challenges the tough ceiling within the 157.75 – 158.20 territory. The 160.00 psychological mark, last seen in 2016, could be the next target.

In brief, GBPJPY is currently holding a bearish bias. Unless the 154.40 region blocks the way, the sell-off may stretch towards the longer-term SMAs.

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