GBP/JPY: Buyers Eye Fresh Highs After Breaking Key Resistance
Market Overview
On Wednesday, December 4th, 2024, the GBP/JPY pair saw a significant shift in momentum following stronger-than-expected UK Purchasing Managers’ Index (PMI) reports. The robust PMI data boosted the British pound, signaling resilient economic activity in the UK, particularly at a time when market speculation around a potential pullback by the Bank of Japan (BoJ) on rate hikes during their December meeting intensified. This speculation led to a decline in Japanese government bond yields and added further pressure on the yen, enhancing the appeal of GBP in the currency pair.
Technical Analysis
On the three-hour chart, GBP/JPY buyers have successfully broken above the key resistance at 190.375, marking a potential shift in trend dynamics. This breakout signals an end to the recent downward pressure and has paved the way for a renewed upward trajectory. Currently, the price is approaching the 141.40% Fibonacci level at 191.327, a crucial technical milestone that could dictate the short-term direction. Should positive momentum persist and break above this level, it would confirm a new bullish phase for GBP/JPY, setting higher targets at 191.796 and subsequently at 192.674.
Oscillators Confirmation
The momentum indicators are supportive of further gains, with the Relative Strength Index (RSI) positioned well into bullish territory, indicating healthy buying pressure. The Moving Average Convergence Divergence (MACD) is also in positive alignment, providing additional confirmation of the upward bias. Moving averages are currently mixed but are showing signs of potential convergence, which could further solidify the bullish outlook.
Alternative Scenario
However, in the event of a shift in sentiment, sellers would need to drag the price back below the immediate support level at 189.497. A confirmed break below this support could expose GBP/JPY to a deeper correction, targeting the key support at 188.076. This move would effectively signal a resumption of the prior bearish trend.
Key Levels
- Resistance Levels: 191.327, 191.796, 192.674
- Support Levels: 190.375, 189.497, 188.076
Key Events to Watch
Investors are awaiting several key events scheduled for Thursday. Notably, the UK Construction PMI report could provide further insight into the health of one of Britain’s most crucial sectors. Simultaneously, a speech by Nakamura, a member of the Bank of Japan’s board, is expected to offer clues regarding Japan’s monetary policy outlook. Any indication of dovishness from Nakamura, combined with strong UK data, could potentially bolster GBP/JPY, fueling further gains above current resistance levels.
Conclusion
GBP/JPY is currently exhibiting bullish momentum after breaking key resistance at 190.375. Sustained buying pressure could lead to further gains towards the next resistance levels at 191.327 and beyond. Conversely, a failure to maintain above the current support may lead to renewed selling pressure, targeting lower levels.
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