GBP/JPY retreats from 2-week highs

The pound opened lower across the board on Monday amid risk aversion after another North Korean nuke test and then dropped further after the UK construction PMI report that came in below expectations. The risk-off environment boosted the demand for the yen. 

UK construction PMI surprises negatively in Aug, at yearly lows

GBP/JPY started the week with a bearish gap and after a modest recovery resumed the downside on European hours. It bottomed at 141.57. At the moment it trades at 141.85, down a hundred pips from Friday’s close. 

Today’s slide poses a risk to the current upside bias. A break below 141.50 could open the doors for an extension of the retreat. The pound could recover strength if it rises back above 142.30/40, that is a short-term relevant level and also where the 20-SMA in 4 hours chart stands.  A consolidation on top could clear the way for a potential test of 143.00

Levels to watch 

The key level to the downside is the 141.50 zone (Aug 30 & 31 low / 20-day moving average): a daily close below could signal the end of the rally that started from 139.30. To the upside, resistance could be seen at 142.45/50 (daily high), 142.75 (Aug 30 high) and 143.00 (Sep 1 high).