- The GBP/JPY has moved past the 20-day Simple Moving Average (SMA), with support established at 194.21.
- The relative strength index (RSI) is nearing 60, indicating that bullish momentum persists.
- A clear break above 195.00 could drive the price up to 196.00.
The Japanese Yen (JPY) continues to decline against the British Pound (GBP) on Friday, with the GBP/JPY trading at around 195.20 at the moment.
This movement reflects the sustained bullish trend that kicked off earlier this week, showing a shift in market sentiment as the pair crossed above the simple 20-day moving average (SMA). Still, the GBP/JPY is currently facing resistance levels that could steer its next move.
The pair has encountered significant resistance near 195. This aligns with the 78.6% Fibonacci retracement from a decline observed between January and April. Since early May, this level has consistently hindered any upward movement and has become a crucial technical barrier. Nonetheless, indicators suggest that the bulls remain in control.
The RSI hovers around 60, showing the pairs are not yet overbought. There’s room for potential gains if resistance can be convincingly breached.
Can GBP/JPY reclaim the 196.00 mark?
If GBP/JPY can maintain daily closing prices above 195.29, it could pave the way to test the psychological level of 196.00, with the next resistance close to 197.30, which relates to previous highs. However, failing to break through current resistance might lead to short-term pullbacks.
On the lower side, the psychological barrier at 194.00 provides initial support. This area, bolstered by the 20-day SMA, now acts as a dynamic support zone. If this level is breached, it could lead to further corrections, potentially around 193.00, which is near the 61.8% Fibonacci retracement level. Additionally, bearish momentum could target the 200-day SMA around 192.80, which would present a more significant support area.
Pound Sterling (GBP) is one of the oldest currencies globally, dating back to 886 AD, and serves as the official currency of Britain. As of 2022, it ranks as the fourth most traded currency, involved in approximately 12% of global forex transactions, averaging around $630 billion daily. The main trading pair is GBP/USD, referred to as “cable,” while GBP/JPY, known as “dragon,” accounts for about 3%, and EUR/GBP makes up 2%. The Bank of England issues the pound.
Monetary policy set by the Bank of England is the key factor influencing the pound’s value. The BOE aims for “price stability,” targeting a 2% inflation rate. Interest rate adjustments are the primary tool for managing this. If inflation rises too high, the BOE may increase rates to control it, which typically bolsters GBP value. Conversely, if inflation is too low, indicating slowed economic growth, the BOE might lower rates to stimulate borrowing and investment.
Economic data also plays a role in GBP value. Indicators like GDP, manufacturing and services PMI, and employment figures can direct the pound’s momentum. A thriving economy usually benefits the currency, often attracting foreign investment and prompting the BOE to raise interest rates, which supports GBP strength. Weak economic data could lead to depreciation of the pound.
Trade balance statistics are crucial for Pound Sterling as well. This measures the difference between export revenues and import expenses within a specified period. High demand for exports can favorably impact the currency, creating a positive net trade balance that strengthens the pound, while a negative balance does the opposite.
