The British Pound (GBP) has made a robust comeback against the Japanese Yen (JPY) during the early hours of trading in London on Wednesday. This rally comes on the heels of an upward revision of the UK’s Gross Domestic Product (GDP) and some unexpectedly good news regarding the Current Account. At the time of writing, GBP/JPY has bounced back to 208.00, recovering a significant portion of its earlier losses, which had seen it dip to a new year-to-date (YTD) low of 206.89.
The latest figures show that the UK economy expanded by 0.5% in the second quarter, which is an improvement from the previous estimate of 0.4%. The year-on-year growth also received an upward adjustment, now reported at 1.4%, up from an earlier figure of 1.2%.
In addition, the Current Account results revealed that the deficit shrank unexpectedly to GBP 19.932 billion in Q2, down from a revised GBP 21.12 billion in Q1. This was contrary to market forecasts that had predicted the gap would widen to GBP 25.6 billion.
Meanwhile, Japan’s economic data isn’t doing much to support the Yen this Wednesday. Retail Trade saw a decrease of 1.2% in August, following a growth of 2.1% in July. Additionally, preliminary figures for Industrial Production indicated a disappointing drop of 4.8% in August, when growth was expected at 1.7%, after a modest increase of 0.5% in July.
Technical Analysis: Bulls Might Face Resistance Around 208.30
The GBP/JPY has bounced back to around 207.90, but it appears that the near-term sentiment remains somewhat bearish. The price action continues to linger beneath a trendline that used to offer support but may now pose resistance. On the 4-hour charts, momentum indicators remain in negative territory, with the Relative Strength Index (RSI) sitting below 40. Furthermore, the Moving Average Convergence Divergence (MACD) is slightly negative, indicating that this rebound may not be robust.
Bulls are likely to encounter multiple resistance levels in the vicinity of 208.30, where the aforementioned trendline intersects with the intra-day high. A breakthrough beyond this point could provide increased confidence for buyers and extend the upward movement towards the September 27 and 28 highs around 209.00. However, targets like the highs from September 22 and 24, near 210.15, might be tough to reach in the near term.
On the flip side, significant support for the Pound is situated at 207.00. If the price falls below this threshold, the 127.2% Fibonacci retracement from September’s rally at about 206.00 could become a realistic target.
(The technical analysis of this story was prepared with assistance from an AI tool. Learn more.)
