Mark O’Donnell
Blackbull Markets Limited
Most traders are aware of the rout that the USD is carving into the Japanese yen and the Great British pound.
Since the beginning of March 2022, the USD has appreciated against the yen by 11%, and 7% against the pound. Naturally, with their respective performances against the USD, the pound has strengthened against the yen since the beginning of March. But, by how much and what is the technical and fundamental perspective of the GBPJPY pair moving forward?
GBP/JPY daily perspective
Some long candles have begun presenting themselves in the GBPJPY daily chart recently, pushing and pulling this pair across a significant range over each trading session. This week, GBPJPY has swung between 156.30 and 161.80.
As of writing, the GPYJPY is trading at 159.200. This level aligns closely to a resistance level from three previous highs going back to October 2021.
The GBPJPY blasted through this resistance quite emphatically on March 22, and then slowly trended up to a peak of ~168.00 within a month. Whereupon pessimism in the UK economy set in, as the Bank of England gave warning of a potential recession, and the GBPJPY gave up a good chunk of gains. At the same time, the pound hit a 2-year low against the greenback.
Even so, traders are still aware of the ultra-accommodative policy of the Bank of Japan. Thus, any potential dovishness from the Bank of England in response to the fear of recession is unlikely to reach the levels exhibited by the Bank of Japan. This fundamental factor may help to morph the 158.00 level, once a persistent level of a resistance, into a firm level of support moving forward.
Figure 1. GBPJPY 1D
GBP/JPY 2H perspective
On a short term view, we might expect some range-bound trading in the GBPJPY. The Average True Range indicator, on a 2-hour chart is showing weak buying and selling pressure. For a GBP bull, a bias for a tight range between 158.00 and 162.00 might be desired. A bear may extend that lower bound down to 155.00 in substitution for 158.00.
Figure 2. GBPJPY 2H with ATR indicator
Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial adviser if you have any questions or concerns as to how a loss would affect your lifestyle.
Recommended Content
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.