technical analysis GBPJPY

Technical analysis of GBPJPY

Pound-yen is up more than 2.5% in 2021 so far amid lower expectations of negative rates in the UK and projections for a relatively quicker recovery by the British economy. Meanwhile demand for havens like the yen remains generally weak in the current ‘risk on’ mood. This technical analysis of GBPJPY looks at the daily chart ahead of British balance of trade on Friday 12 February.

High resistance is above the top of this chart around March 2020’s high of ¥148, but ¥145 could be a psychological hurdle before this. Low support might occur around ¥134.50, but areas from moving averages are likely to be important before this relatively distant area could be tested.

Technical indicators on GBPJPY D1

 

Moving averages continue to give a strong buy signal, with all three of the 50, 100 and 200 SMAs below the prices and faster lines successively above slower. Each of these might provide support if there’s a deep retracement next week.

The slow stochastic (15, 5, 5), currently at around 91, has been strongly overbought for most of 2021, although there is now no clear signal of buying saturation from Bollinger Bands (50, 0, 2). Volumes of buying and selling have been fairly closely balanced over the last few weeks.

Price action and Fibonacci

 

Momentum upward increased somewhat last week with the large up candle on 4 February, but based on events since then it seems that the current area just below ¥145 might be a zone of resistance. The fundamental movement here is clearly upward while liquidity-based movements are downward from new highs. The pattern of fairly sharp initial retreats from new highs in December and January might suggest at least a small retracement on this chart over the next few days unless British trade data are unexpectedly positive.

The weekly Fibonacci fan has been an important reference for the uptrend over the last few months, but now price has move above the 38.2% zone. This could be taken as an overbought signal by some technicians that adumbrates prices around the top of the fan as the extent of the next retracement. However, the first strong zone from Fibo to the downside is the 61.8% monthly retracement area, which also coincides with the value area between the 50 and 100 SMAs.

Technical analysis of GBPJPY: summary

 

The number of important releases from the UK on Friday morning GMT means that many pairs with the pound including GBPJPY are likely to be more volatile then. The main focus is on balance of trade for December, but annual and quarterly preliminary GDP also have the potential to drive movement on charts.

Overall, the technical picture for pound-yen remains very positive but suggests a retracement to come over the next few periods. The extent of this depends on sentiment and interaction with the areas of support mentioned above. Conversely, ongoing gains are certainly possible if British data are received positively.

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