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Talking Points:

• GBP/JPY Technical Strategy: Flat

• Pound in Consolidation Mode After Dropping to 4-Month Low vs. Yen

• Waiting to Enter Short on Confirmation of 3-Year Rising Trend Break

The British Pound paused to consolidate losses after dropping to the lowest level in four months against the Japanese Yen. As we discussed previously, prices may be in the process of carving out a top in the multi-year uptrend established from June 2012.Confirmation of the structural reversal is absent for now however.

Near-term support is now at 182.52, the 61.8% Fibonacci expansion. A daily close below this boundary opens the door for a test of the next downside inflection point at 180.76, the 76.4% level. Alternatively, a push above the 14.6% Fib retracement at 184.31 clears the way for a challenge of the 184.98-185.47 area. This is marked by the July 8 low and the 23.6% retracement.

Current positioning does not offer an actionable trading opportunity. On one hand, prices are too close to resistance to justify a long position from a risk/reward perspective. On the other, the absence of a defined bearish reversal signal warns that jumping in short is premature, particularly with top-tier event risk by way of the ECB policy announcement and US jobs report still ahead. We will remain flat for now.

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