The GBPJPY currency pair, after its impressive surge of 2.37% last week, is currently navigating a period of consolidation, showcasing resilience in the face of shifting market dynamics. Recent reports from Japan reveal a Tokyo CPI at 2.4% year over year, a slight dip from the previous 2.6%, with the core CPI meeting expectations at 2.1%, down from 2.3%. With these numbers remaining above the Bank of Japan’s 2% target, the possibility of a policy pivot is gaining traction, bolstering the Japanese Yen.
Interestingly, a stable rebound in the equity markets on Monday has somewhat diminished the safe-haven allure traditionally associated with the Yen, limiting its potential ascent. This development, in turn, has allowed the GBPJPY bulls to maintain their position, capitalizing on the evolving market landscape.
Technical
On the 4H chart, a recent uptrend was sparked by a breakout from a falling wedge pattern, which sent the currency pair above the 25-SMA (green line), 50-SMA (blue line) and 100-SMA (orange line), confirming the bullish tilt. However, a recent pullback brings the pair back to the 25-SMA at 182.970 and leaves the currency pair open to directional price action after a period of consolidation.
A breakdown at 182.970 could signal a shorter-term shift in momentum in the bears’ favour. In this case, a retracement of the prior uptrend could be initiated, with the first potential level of support established at 182.346. As the retracement continues, the currency pair may look for buyers at the Fibonacci midpoint at 181.638, backed by the 50-SMA, creating a psychological support level.
In contrast, if the 25-SMA support holds, the market’s sentiment could remain bullish. The resistance at 184.291 previously proved too much for the buyers to break through, but after the recent pullback, the market may have another attempt. If successful, the bulls could look toward resistance at 184.643 as a potential level of interest.
Summary
After an impressive week last week, the GBPJPY currency pair seems hesitant to continue the bullish momentum. The 25-SMA support at 182.970 could be crucial to watch in the upcoming sessions to gauge whether the retracement of the prior uptrend will hold into the coming week.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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