technical analysis GBPJPY

Technical analysis of GBPJPY

The pound has continued to make gains against most other major currencies including the yen this week as participants expect quicker economic recovery in the UK and the Bank of England’s very loose monetary policy continues. Yields from the UK’s benchmark decade bonds remain above 0.7% today. This technical analysis of GBPJPY looks at the daily chart.

A clear possibility for high resistance here is the 161.8% weekly Fibonacci extension area around ¥153.65, although this area has yet to be tested. Low support is less clear, but it might occur around ¥136.70, the limit of phases of losses in December last year.

Technical indicators on GBPJPY D1


Moving averages continue to give a strong buy signal, with each of the 50, 100 and 200 SMAs successively above slower lines and below the price. The first important support from moving averages is the 50 SMA from Bands which is currently around ¥145.65. Below this, the value area between this SMA and the 100 is likely to be in view if there’s a relatively deep retracement.

While there has been no overbought signal based on Bollinger Bands (50, 0, 2) since 25 February, the slow stochastic (15, 5, 5) at about 91 is far inside the zone of buying saturation. Volume has increased slightly over the last couple of weeks, with buying volume generally dominating.

Price action and Fibonacci


Momentum has been fairly steady in the last few days of trading despite the break above ¥150. In this situation of small up periods tracking the upper deviation of Bands closely while the stochastic signals overbought, traders would traditionally expect a consolidation. The very limited liquidity-based retreat on 25 and 26 February might make ¥147.50 a short-term support.

The obvious target for bulls here based on Fibonacci is the 161.8% weekly Fibonacci extension area based on the pound’s bout of losses around this time last year. To the downside, the main areas in view from Fibo are the 100% weekly retracement and the 38.2% fan: these and the 50 SMA from Bands are all in the range of about ¥144 to ¥145.50, so this zone could also be in view for short-term sellers next week.

Technical analysis of GBPJPY: summary


Several economic releases are due from the UK tomorrow morning, the most important of which is British balance of trade for January at 7.00 GMT. The consensus estimate for this is a deficit of £4.8 billion against the previous deficit of £6.2 billion.

TA is in general positive for pound-yen and the trend remains fairly strong, but buyers here are likely to be well served by remembering not to buy the tops. Waiting for a retracement would help a potential buyer to reduce risk compared to entering at an extreme. Relatively low momentum near the upper deviation of Bands with the stochastic overbought might introduce a move downward tomorrow morning depending on the data.

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