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. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

GBP/USD holds above 1.4050 after upbeat UK job figures

GBP/USD is trading above 1.4050, near the fresh 35-month highs as US yields retreat from the highs and push the dollar lower. UK wages rose by 4.7% in December and January's jobless claims fell by 20,000, both better than expected. 

GBP/USD News

Bitcoin stages a quick bounce above $50,000 after the 11% sell-off

The wild ride in Bitcoin continues in Tuesday’s Asian trading, as the BTC sellers are back in control, knocking off prices by almost 11%. Although, strong bids emerged just above $48,500 levels, prompting the flagship cryptocurrency to stage a quick recovery back beyond the $50,000 mark.

Read more

EUR/USD sets four-week high, eyes Powell's testimony

EUR/USD advances toward 1.2200 but is struggling to keep the bullish momentum going, with investors turning cautious ahead of the Fed Chairman  Powell's appearance before Congress later Tuesday.

EUR/USD News

XAU/USD retreats from one-week tops, on the defensive below $1810 level

A combination of factors failed to assist gold to capitalize on the early uptick to one-week tops. The underlying bullish tone in the financial markets capped gains for the safe-haven commodity. The recent rally in the US bond yields also held bulls from placing bets around the yellow metal.

Gold news

US Dollar Index struggles for direction around 90.00, looks to Fed, data

DXY consolidates the recent drop and hovers around 90.00. The dollar has decoupled from performance in yields in past hours. Housing data, Fed’s Powell testimony, Consumer Confidence next on tap.

US Dollar Index News

Forex MAJORS

Cryptocurrencies

Signatures