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The GBP/JPY pair dropped after failing to stabilize in the buyers' territory. Now, it is trading at 165.03 level at the time of writing. The pressure is high as the Japanese Yen Futures rallied lifting the JPY. Still, a larger drop needs confirmation as the rate moves somehow sideways.
Surprisingly or not, the Japanese Yen rallied even if the Japanese economic data was disappointed. The Housing Starts dropped by 4.3% versus a 1.7% growth expected, while Prelim Industrial Production dropped by 7.2% more versus a 0.2% drop forecasted.
On the other hand, the UK's Final GDP rose by 0.8% matching expectations, the Current Account came in at -51.7B versus -39.7B expected, Nationwide HPI surged only by 0.3% compared to a 0.5% growth estimated, while the Revised Business Investment registered a 0.6% fell more compared to 0.5% drop predicted.
As you can see on the H1 chart, the pair failed to stabilize above the 23.6% (165.99) retracement level or to approach and reach the downtrend line signaling exhausted buyers. Personally, I've drawn a descending pitchfork hoping that I'll catch a new sell-off.
The bias remains bearish in the short term as long as it stays under the descending pitchfork's upper median line (uml). The GBP/JPY pair tested and retested this dynamic resistance confirming strong sellers around this obstacle.
The false breakout above the upper median line (uml) signaled a potential deeper drop. Now, it challenges the 38.2% (164.84) retracement level. A new lower low, a valid breakdown below the 164.67 could activate more declines and could bring new selling opportunities. The median line (ml) stands as a potential target if the rate drops deeper.
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