The GBPJPY currency pair has demonstrated resilience and momentum, trading 36 basis points higher for the month and on the verge of securing four consecutive months of gains. This positive trajectory comes amidst significant market attention on the Bank of Japan’s upcoming monetary policy decision following its recent shift away from negative interest rates amid mounting inflationary pressures.
The Bank of Japan’s commitment to further rate hikes in response to accelerating inflation poses implications for the Japanese Yen’s strength. However, the allure of higher interest rates in the U.K. has attracted traders to British Pound-denominated assets, bolstering the Pound against the Yen.
Recent economic data paints a mixed picture, with Japan reporting growth in both its services and manufacturing sectors, signalling a robust economy. Conversely, the U.K. witnessed a contraction in manufacturing activity, reflected in a PMI reading below the 50 mark. Despite this setback, the British Pound has remained resilient, trading higher against the Japanese Yen during the London session, indicating ongoing market dynamics and potential trading opportunities.
Technical
The recent performance of the GBPJPY currency pair has been characterized by a cautious uptrend and subdued trading activity amid heightened market volatility. With ongoing geopolitical tensions and a flurry of economic data releases, the pair has hovered around its 100-day moving average, reflecting uncertainty among traders regarding its broader direction.
Key levels of support and resistance at 190.299 and 192.777, respectively, have played a pivotal role in delineating the pair’s price action. Notably, a retracement occurred following a test of the support level, with buying activity intensifying at this critical juncture. This retracement led to a rebound to the 61.80% Fibonacci Retracement Golden Ratio, potentially signalling a pivot point for future price movements.
If upward momentum persists, a retest of the 192.777 resistance level is plausible, indicating a bullish bias among traders. Conversely, a resurgence of downside momentum could see the 190.299 support level acting as a point of interest to the downside, suggesting a bearish sentiment prevailing in the market. Traders will likely closely monitor these key levels for insights into potential trading opportunities.
Summary
In conclusion, the GBPJPY exhibits resilience amid mounting inflationary pressures and geopolitical tensions. Key technical levels, like 190.299 support and 192.777 resistance, shape its trajectory. A cautious uptrend persists, with the potential for a bullish bias towards retesting the resistance level, while downside momentum may target the support level.
Sources: S&P Global, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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