GBP/JPY
The dollar traded lower against almost all of its G10 peers during the European morning Thursday. The greenback was stable only vs GBP, CAD and AUD.
The British pound gave back early gains against the dollar after the 2nd estimate of UK Q1 GDP confirmed that the economy slowed in early 2015, falling short of expectations that it would be revised up. The 2nd estimate showed that GDP rose 0.3% qoq in Q1, unchanged from the 1st estimate. Even though the UK’s economic recovery has cooled somewhat in Q1 from the strong pace of the past year, it still remains solid, especially in comparison to the weaker growth in Eurozone. On top of that, the Bank of England expects the growth to accelerate in Q2. On the negative side, the uncertainty over the in/out EU referendum has a negative impact on business investment inflows into the UK. Removing this uncertainty is necessary for the pound to remain supported, in our view.
GBP/JPY hit resistance at 190.70 (R1) and slid somewhat following the 2nd estimate of UK Q1 GDP. The short-term picture remains positive in my view, and as a result I would expect a clear close above 190.70 (R1) to open the way for the resistance territory of 192.80 (R2). However, taking a look at our momentum studies, I see signs that a corrective move could be on the cards before the next leg higher. The RSI hit resistance slightly above its 70 line and turned down, while the MACD shows signs of topping and could fall below its signal line any time soon. A price break below 189.80 (S1) could confirm the pullback and perhaps target the 188.60 (S2) field. On the daily chart, the rate is still trading well above both the 50- and the 200-day moving averages, and this supports the continuation of the short-term uptrend. However, our daily momentum indicators give evidence of a possible correction as well. The 14-day RSI looks ready to exit its above-30 territory, while the daily MACD has topped and could fall below its trigger in the near future.
Support: 189.80 (S1), 188.60 (S2), 187.75 (S3).
Resistance: 190.70 (R1) 192.80 (R2), 195.00 (R3).
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