Being a European currency, the pound followed the euro, and on Monday opened with a gap down against the Japanese yen. During times of financial instability, the yen together with precious metals and the Swiss franc are considered as safe-haven assets.
The Japanese data, released during the Asian session, were better than expected. Manufacturing Index in the second quarter rose to 15 points, beating the forecast for 12, Non-Manufacturing Index grew to 23, compared to expectations for 22, and Manufacturing PMI was 50.1 instead of 49.9.
At the same time, the UK data, released later during the European session, disappointed the market participants. UK June Manufacturing PMI dipped to a record low of 51.4 points, last seen two year ago, below the forecast for 52.5. In May, the figure was 51.9.
This Thursday at 15:30 (GMT +3) US Nonfarm Payrolls is released. The figure is expected to grow by 230 000 in June from 280 000 in May. This month, the index influences the value of the US dollar against the yen and the pound, which, in turn, affects the price of the cross-pair GBP/JPY. Thus, be aware of high volatility while making trading decisions at this time.
Support and resistance
For three days the pound is trading in a narrow channel against the yen, and a gap down, seen this Monday, has not been closed. The pair reached the support level 192.10 (EMA144 on the 4-hour chart). If the decline continues, the next support level will be 191.00 (EMA144 on the 4-hour chart). However, indicators OsMA and Stochastic on the 4-hour chart have reversed to long positions. On the daily chart indicators are in the sell zone. When the indicators on the daily chart enter the buy zone (OsMA histogram starts to rise, and Stochastic fast line crosses the slow one bottom to top), long positions may be considered.
The pair is supported by the difference in interest rates in Japan and the UK, as well as by the difference in expectations concerning the monetary policy of the Bank of England and the Bank of Japan. Fundamental data speaks for long positions, but only when supported by technical indicators.
Support levels: 192,140, 191.00, 189.25, 186.20, 182.70, 181.20.
Resistance levels: 194.50, 195.50, 197.80.
Open long positions from levels 192.00, 191.00, 189.25 with targets at 194.50, 195.50, 197.80. Alternatively, consider short positions when the level 182.70 is broken through with targets at 181.20, 176.30, 175.80, 169.70, 167.30.