The GBPJPY currency pair has recently witnessed a fascinating turn of events. After enduring three consecutive weeks of decline, it staged an impressive turnaround, closing positively last week and carrying upward momentum into the current trading week, marking a 50 basis point gain.
The dynamics shaping this shift stem from the Bank of Japan’s (BoJ) steadfast maintenance of its ultra-loose monetary policy, keeping interest rates at -0.1%. This decision sparked a flurry of activity as traders sought refuge in the higher-yielding allure of the British Pound, triggering a surge in the GBPJPY.
Notably, this sentiment favouring the Pound was further bolstered by encouraging signs within the UK’s retail sector, showcasing resilience despite the Bank of England’s efforts to temper consumer activity through elevated interest rates.
The GBPJPY’s price action unveils a tale of intriguing fluctuations, hinting at a potential shift in market dynamics. After consecutive gains in the past two trading sessions, the currency pair eyes a third day in positive territory, signalling a potential reversal from its previous downtrend lingering below the 100-day moving average.
The GBPJPY encountered a resistance level at 184.321 amid the prevailing bearish trend. However, finding a foothold at the 178.333 level, where oversold RSI conditions prevailed, the pair orchestrated a notable turnaround.
The pair subsequently stopped shy of the formidable resistance level, prompting a retracement. Amid this market oscillation, the 61.80% Fibonacci Retracement Golden Ratio emerged as a pivotal intermediate support level, reflecting the shifting sentiment among traders.
The current juncture presents a critical crossroad: should the upside momentum persist, a retest of the resistance level becomes probable. Conversely, a substantial breakdown below the Golden Ratio, coupled with high trading volumes, might herald prolonged bearish pressures, potentially retesting the 178.333 support level.
The GBPJPY, amidst recent tumultuous movements, reflects a complex interplay between central bank policies and market sentiment. While a resurgence buoyed by BoJ policies and positive UK retail data hints at potential stability, the currency pair navigates crucial technical thresholds.
Sources: Bank of Japan, Office for National Statistics, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.