GBP/JPY Eyes Bullish Reversal as Yen Demand Eases
Market Overview
Sterling has begun the week with signs of recovery against the Japanese Yen, capitalizing on a pullback in haven flows. Although safe-haven demand for the yen remains elevated, weaker-than-expected industrial production data from Japan has triggered a wave of profit-taking among investors, particularly after the yen recently reached its strongest demand level in over six months. This shift in sentiment has allowed GBP/JPY to stabilize and initiate a potential short-term reversal after several days of downside pressure.
Technical Analysis
On the 3-hour chart, GBP/JPY is attempting to break out of its recent downtrend. Buyers have managed to pierce the descending trendline and are now testing resistance at 188.518. Sustaining a breakout above this level would strengthen the case for a bullish reversal. If momentum persists, the next upside targets are mapped at 189.047, 189.720, and 190.463 respectively.
Momentum indicators are turning in favour of the bulls. RSI has moved above its midline, suggesting increasing buying interest, while the MACD histogram continues to rise above zero, confirming growing bullish momentum.
However, if buyers fail to hold above 188.518, sellers may attempt to reassert control. A break below 187.755 would reopen the path toward the recent swing low at 186.573. Breaching this key support would invalidate the bullish setup and reinstate the broader downward bias.
Key Technical Levels
Resistances: 189.047, 189.720, 190.463
Supports: 187.755, 186.573
Fundamental Drivers
The next key event for GBP/JPY is Tuesday’s UK labor market report. Expectations are for the unemployment rate to remain steady. However, a slowdown in wage growth and employment change figures for February may reduce pressure on the Bank of England to maintain a hawkish stance. Any signs of easing inflationary pressure could dampen the pound’s momentum and limit further gains against the yen. Conversely, any upside surprise in wage data could support the pair’s bullish continuation.
Conclusion
GBP/JPY has broken above trendline resistance, with buyers eyeing 189.047 and beyond. A failure to hold above 188.518 would leave the pair vulnerable to a retest of 187.755.
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