The British pound fell heavily against the Japanese yen on Thursday after a brief uptick following the decision by the Bank of England (BoE) to keep the benchmark interest rate stable at 0.10 per cent and to commit to a further 100 billion pounds in economic relief.

The BoE’s decision for added monetary stimulus should weigh on the pound and may keep prices in check in the long run, limiting large upside potential. The bears seem firmly in control at the moment, with a likely target of closing below the 132 mark in a bid to test the 129 level in the coming sessions.

The 50-day moving average did little to prevent the slide today, though an effort was made to overturn the trend at that point. We would expect further selling pressure to appear around the 134 mark should prices manage to correct higher in the short run.

The GBJPY remains highly dependent on risk flow sentiment and, in a time of increase global uncertainty, will likely continue to drift steadily lower. A flare up in tensions at the resumption of Brexit trade negotiations between the UK and the EU can be expected and should weigh on the British pound going forward.

From a technical point of view, both the MACD and RSI indicators suggest further downward momentum remains on the table. Although the chances of mean reversion increase as the RSI enters oversold territory, any upward correction will likely be sold barring any dramatic economic data releases by Japan.

Looking at the upside, the GBPJPY will have to regain footing above the 0.5 Fibonacci retracement level at 134.119 in order to re-establish bullish traction. The current forecast does look limited for the bulls, who may get their point across in the upcoming sessions if they manage to hold prices above 132.986.

Analyzed by: Mr. Thibault Moirez, Independent Analyst