GBPJPY Support Turned Resistance (June 20, 2016)

From there, price showed signs of a correction and applying the Fib tool on the latest swing high and low shows that the 50% level is close to this broken support zone.

In addition, the 100 SMA is near this retracement level. It is also below the longer-term 200 SMA, confirming that the path of least resistance is to the downside and that the downtrend could resume. A higher pullback could last until the 61.8% Fib, which is closer to the 200 SMA and might be the line in the sand for any correction.

Stochastic is still heading north so GBPJPY could follow suit. RSI is also on the move up but is nearing the overbought levels so buying pressure might be exhausted and sellers could take over. If so, price could resume its drop to the previous lows or create new ones.

The main event risk for this setup this week is the EU referendum, as a vote from the UK to leave the EU could mean significant losses for the pound. After all, this would bring a significant amount of economic and financial uncertainty, not to mention likely job losses and a potential recession. 

So far, polls are still showing mixed results, although the "stay" camp appears to have gained traction. It's not clear whether the fatal shooting of UK MP Jo Cox has had an impact on sentiment and convinced some of the undecided voters to favor the status quo.

As for the yen, threats of currency intervention are weighing on the currency, which has rallied sharply and significantly last week. Analysts are speculating that the government would not step in unless USDJPY has reached 100.00 but it appears that these fears are keeping yen pairs like GBPJPY propped up at the moment.

By Kate Curtis from Trader's Way