- GBP/JPY seems ready to pick up momentum on Thursday, which could be a good thing.
- The ascending channel formation suggests a strong short-term uptrend.
- A decisive break below the 196.00 level is necessary for a significant decline.
During Thursday’s Asian session, the GBP/JPY cross is likely to attract some dip buyers around the 198.40-198.35 range and may experience a slight pullback from the recent one-year high. Currently, prices are hovering around 199.00, showing potential for further bullish movement.
The price action over the last couple of months has been within an upwardly tilted channel. Moreover, the oscillators on the daily chart remain in positive territory, distancing themselves from the overbought zone. This signals a favorable outlook in the short term, suggesting that the path of least resistance is upward for the GBP/JPY pair.
There is a solid possibility for a subsequent rally to retest the peak established earlier this year, just shy of the key level of 200.00. This point aligns with the upper boundary of the previously mentioned trend channel. If this level breaks, it could trigger a new bullish phase for GBP/JPY, continuing the pair’s upward trend established over the past three months.
On the flip side, the area around 198.40-198.35 seems to provide immediate support ahead of the 198.00 figure. A significant breach below this level might lead to some technical selling and could expose further support near the horizontal zone of 197.15-197.10. This weakness could push GBP/JPY toward the mid-support level at 196.50 and potentially down to 196.00, the lower edge of the trend channel.
Pound Sterling FAQ
Pound Sterling (GBP) is the world’s oldest currency, dating back to 886 AD, and is the official currency of Britain. As of 2022, it ranks as the fourth most traded currency in the foreign exchange market, representing 12% of transactions with an average daily volume of $630 billion. The main trading pair involving GBP is GBP/USD, also referred to as “cable,” comprising 11% of FX, followed by GBP/JPY (3%) and EUR/GBP (2%). The Bank of England (BOE) issues the Pound.
The key factor influencing the value of the Pound is the monetary policy established by the Bank of England, particularly its commitment to “price stability,” which aims for a stable inflation rate around 2%. Adjustments to interest rates are the primary tool used to maintain this. If inflation rises too high, the BOE typically hikes interest rates to make borrowing more expensive, which tends to attract global investors and support GBP. Conversely, if inflation is low and economic growth appears sluggish, the BOE might lower rates to encourage borrowing and investment.
Economic indicators can also significantly impact the value of the Pound. Measurements like GDP, manufacturing and services PMI, and employment rates are important, as a robust economy can attract foreign investment and potentially lead to interest rate hikes, which would support GBP. On the other hand, weak economic data could lead to a depreciation of the currency.
Trade balance is another critical indicator for Pound Sterling, reflecting the difference between the value of exports and imports over a specific timeframe. A favorable trade balance strengthens the currency, while a negative balance could weaken it, especially if foreign buyers show demand for a country’s exports.
