The GBP/JPY pair saw a positive movement on Friday, climbing approximately 0.50%. This rise is largely attributed to the overall weakness of the US Dollar, which has worked in favor of the higher-yielding British Pound against the Japanese Yen, which has struggled against most of its counterparts, with the exception of the Greenback. Currently, the pair is trading around 210.66, reaching its highest point since September 22, and it’s on track for a third straight weekly gain.
The growing anticipation of a rate hike by the Bank of England (BoE) by the end of the year may help to maintain a significant interest rate gap with the Bank of Japan (BoJ), currently at 250 basis points—3.75% for the BoE compared to 1.25% for the BoJ.
Looking ahead, attention will shift toward a substantial array of UK economic data expected next week, including labor market results, inflation figures, and retail sales stats. On the flip side, traders are waiting for national Consumer Price Index (CPI) statistics from Japan.
Technical Analysis
On the daily chart, GBP/JPY remains below the 50-day Simple Moving Average (SMA) at 211.66 and the 100-day SMA at 213.54, which hints at a near-term bearish sentiment despite the latest uptick. The 200-day SMA at 213 reinforces resistance alongside the 50.0% and 61.8% Fibonacci retracements at 211.75 and 212.90 respectively.
The momentum indicators show a constructive outlook, with the Relative Strength Index (RSI) around 54 and the Moving Average Convergence Divergence (MACD) displaying positive values. However, the Average Directional Index near 24 suggests that while the trend exists, its strength may be diminishing.
On the upside, immediate resistance is identified at the 50-day SMA at 211.66, followed by the 50.0% Fibonacci retracement at 211.75. The 61.8% retracement at 212.90 alongside the 200- and 100-day SMAs at 213.01 and 213.54 respectively, represents a wider supply zone leading up to the 78.6% level at 214.54. Conversely, initial support is at the 38.2% retracement at 210.61, with further demand expected at the 23.6% level at 209.19 and a structural low around 206.89. As long as prices stay below the cluster of medium and long-term averages, any rallies are likely to face selling pressure at these resistance levels.
