GBP/JPY bulls in play on UK easing covid lockdowns but meet a wall of technical resistance

• GBP crosses have been on a tear at the start of the week as investors back Britain again considering 
• GBP/JPY has rallied to fresh cycle highs but is now coming back under pressure. 

UK Prime Minister Boris Johnson's announcements in Parliament of a four-step roadmap to take England out of its Covid-19 lockdown has supported GBP/JPY to fresh highs of 148.29.

The UK has been in full national lockdown since January 4, after a new, more transmissible variant of coronavirus was discovered in southeast England.

The PM has told lawmakers that step one would begin on March 8 with schools set to reopen across England, as well as the return of limited outdoor social interaction, such as sitting on a park bench with one other person.

Step one will also have a second phase on March 29, where further restrictions will be lifted, allowing groups of six to meet outside and two households to mix.

Step two, which would happen no earlier than April 12, will see pubs and restaurants back in service as well as the return of non-essential retail, such as hairdressers, gyms, museums, zoos and theme parks. 

Step three, which will be in place no sooner than May 17, will remove most social distancing rules.

GBP positioning on the rise 

Meanwhile, the net GBP long positioning has been edging higher of late and adding to the surge of the prior week as investors expect that the UK’s relatively rapid vaccine roll-out programme will support an economic recovery.

Moreover, net longs were previously lifted by a more hawkish than expected outcome from the February BoE policy meeting which has transpired to the spot market. 

That coupled with a softer US dollar and risk-on sentiment elsewhere, sterling is sailing through 1.40 vs the greenback and has marked the highest levels since April of 2018. 

GBP/JPY technical analysis

For the cross, the yen is taking on the US dollar, but an upside continuation in USD/JPY from the 20-day EMA would leave scope for higher levels in GBP/JPY. 

With that being said, sterling is embarking on a deeper test of the supply zone which exposes the cross for a significant downside correction with the 4-months of uninterrupted higher closing lows and highs. 

A break of 146.40 and the 10-day EMA open risk to 145.07 old resistance and then the 143.80s and a 38.2% Fibonacci retracement of the weekly bullish impulse. 

Daily chart

A 50% mean reversion has a confluence with prior resistance looking left at 142.71. 

Weekly chart

1-hour chart

Meanwhile, there is a bearish bias while below the prior support structure on the hourly chart that meets the current highs and a confluence of the 61.8% Fibo retracement of the latest bearish hourly impulse:

If the price continues lower, then a break of 147.80 opens risk to the 147.40s for the sessions ahead.