Ahead of Tuesday’s (20 May) release of the UK’s Consumer Prices Index (CPI) reading for April, it looks as though sterling is beginning to run out of steam against its Japanese counterpart. Now is an opportune moment to sell the pound against the yen following a run lasting a full seven quarters.

The UK’s CPI has remained in free-fall from the 2.9% struck last summer (Jul 2013) to March’s 1.6% year-on-year reading. While this alone hasn’t caused a significant response across sterling pairs as of yet, a low figure on Tuesday could temper rate hike speculation. The UK, despite improving manufacturing data, is yet to experience a pick-up in its export sector and the strong currency must be a concern here.

In contrast the Japanese yen is still struggling against its G10 counterparts owing to prime minster Shinz? Abe’s ultra-loose monetary policy. The question remains how much downside is to come before the policy measures are priced in.

Key levels: The GBP/JPY has been trapped in consolidation since February, which provides traders with pre-determined upper/lower trading channels that can be used for stop-loss/triggers for positions. The pair’s daily Relative Strength Index is currently trading at 45.76, which in collaboration with lower Japanese equities adds confidence to a potential break to the downside.