The GBP/JPY currency pair payments are currently exhibiting phenomenal volatility as it tries to find its way through market resistance levels. The euro-yen cross had previously climbed to a four-month high of 196.40 earlier today. It struggled to hold onto that momentum and fell back down to about 194.45 during European trading hours on Wednesday. This retracement reinforces the bearish undertone for GBP/JPY. The currency pair has faced strong headwinds from horizontal resistance around the March 27 high of 196.00.
Even after this recent pullback, the larger view for GBP/JPY is still positive. The 20-day Exponential Moving Average (EMA) is in play at about 192.32. Its upward trajectory is a promising sign that we might be in store for some future progress. In fact, the Japanese Yen has been recently strengthening. This recent move was spurred on by jarring remarks from Bank of Japan Deputy Governor Shinichi Uchida, causing an impressive 500+ pip correction in the currency pair.
Current Price Action and Technical Indicators
As GBP/JPY now retraces from its high, it meets several important technical levels that could tell the future direction. The 14-day Relative Strength Index (RSI) as a measure of momentum has fallen from 67.00 to just under 60.00. Traders are going to be watching this key level like a hawk. If the RSI continues to hold above 60.00, it would indicate the potential return of upside momentum for the currency pair.
Holding this high water mark is very important. It would open the door for GBP/JPY to soar even further. Analysts believe a forceful move above the four-month high at 196.40 would send the pair soaring to the January 7 high at 198.26. To be truly fatalistic, this move will likely even breach the psychological barrier of 200.00.
On the one hand, bullish sentiment is riding high, and optimism continues to permeate through market participants. Alternatively, if GBP/JPY were to break below some key support levels it may see considerable downside. First up is the May 6 low of 190.33, bringing the pair likely down to the March 11 low of 188.80 and the February 7 low of 187.00.
Market Reactions and Economic Influences
Recently, comments from BoJ Deputy Governor Shinichi Uchida spurred the Japanese Yen 2% higher against the dollar. Consequently, the Yen has been appreciating against foreign currencies. His comments ignited a huge increase in pressure for the Yen to appreciate. Consequently, GBP/JPY has made a deeper retracement at the start of this week. Speculation by the market is already debating how these changes will affect the direction of Japanese monetary policy. Consequently, currency trading patterns are being affected.
S traders need to remain vigilant as they interpret economic indicators. They need to account for today’s geopolitical landscape that is increasingly pushing towards volatility in currency markets. How the British Pound relates to the Japanese Yen is an ever evolving situation. It changes based on how well the economy is doing and what the central bank is doing.
Future Outlook for GBP/JPY
Going forward GBP/JPY’s outlook will depend on how it responds to today’s resistance. Market sentiment around both currencies will be an increasingly important factor in determining its course. The outsized bullish outlook remains in effect as long as the significant support remains intact. This is particularly noticeable near the EMA and RSI decision boundaries.
If the currency pair clears its immediate resistance at 196.00, it could set off a wave of buying momentum. That momentum would soon see the bill hitting new highs in each of the next few sessions. If we are unable to maintain this upward trajectory, we will have to re-evaluate our bullish stance. All of this may result in an intensifying outright bearish narrative.