GBP/JPY Price Analysis: Seems vulnerable near two-month lows, below 38.2% Fibo.

• GBP/JPY finally broke down of a near one-week-old trading range support near mid-135.00s.
• The set-up favours bearish traders and supports prospects for an extension of the downtrend.
• Attempted recovery might now confront stiff resistance and remain capped near the 135.60 area.

The post-BoE selling around the British pound, coupled with a strong pickup in demand for the safe-haven Japanese yen pushed the GBP/JPY cross to near two-month lows on Thursday.

Sustained weakness below the 135.50-40 area marked a fresh bearish breakthrough a near one-week-old trading range and the 38.2% Fibonacci level of the 124.07-142.72 positive move. This comes on the back of last week’s break below a multi-month ascending trend-line support and might have already set the stage for an extension of the recent downward trajectory.

However, RSI (14) on the daily chart has moved on the verge of breaking below the 30 mark and suggests slightly oversold conditions, which held bearish traders from placing fresh bets. That said, the cross still seems vulnerable to weaken further below the 134.45 intermediate support and test the 134.00 mark before eventually dropping to 50% Fibo. level, around mid-133.00s.

On the flip side, any meaningful recovery back above the key 135.00 mark now seems to confront stiff resistance and fizzle out near the 135.60 support breakpoint (38.2% Fibo. level).

GBP/JPY daily chart

Technical levels to watch