The GBPJPY currency pair has recently demonstrated remarkable strength, with four consecutive weeks of gains and poised for a fifth week following a 50 basis point increase so far this week.
This bullish trend stems from significant shifts in monetary policy, notably the Bank of Japan’s decision to terminate eight years of negative interest rates, resulting in a ten basis point rate hike. However, its cautious tightening approach has weakened market confidence in the Yen, depreciating it to a 15-year low against the British Pound.
Consequently, the GBPJPY pair has already achieved an impressive nearly 7% gain this year, potentially signalling a fourth consecutive year in positive territory. This resilience is driven by interest rate differentials, favouring the Pound due to its higher-yielding prospects compared to the Yen. As economic fundamentals and monetary policies continue to evolve, the question arises: will the GBPJPY maintain its upward trajectory, securing yet another year of gains?
Technical
The GBPJPY pair has exhibited a clear uptrend, remaining above its 100-day moving average, signalling a sustained upward trajectory.
Initially, a selloff occurred at the 192.223 level amid overbought RSI conditions, establishing a resistance level. However, the pair found support at the 100-day moving average or 190.674 level, leading to a bullish reversal in line with the overall uptrend. This bullish momentum intensified, resulting in a breakout above the resistance level.
Currently, the pair has surpassed resistance and tested the 23.60% Fibonacci Extension level. If buyers continue to dominate market sentiment, a break above this level could pave the way for further gains, potentially targeting the 50% Fibonacci Extension level. Conversely, a retest of the 192.223 level, now acting as support after the breakout, may occur in the event of a downturn. Overall, the price action suggests a bullish market structure, with buyers likely to maintain control unless a significant shift in market sentiment occurs.
Summary
Ongoing Yen weakness has propelled the GBPJPY pair to remarkable strength, marked by a clear uptrend. With support at the 100-day moving average and a breakout above resistance, buyers are poised to dominate, potentially targeting the 50% Fibonacci Extension level.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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