GBP/JPY Sellers Aim for Correction Amid Economic Data Divergence

Date: Friday, June 28, 2024 

Friday Market Overview: 

On the final trading day of June, mixed economic data from Japan and the UK are influencing the GBP/JPY pair. Japan’s economic data show significant improvements in core Tokyo inflation and industrial production, potentially strengthening the yen. Meanwhile, UK data reveal positive quarterly and annual GDP growth, surpassing market expectations, which could support the pound. However, concerns persist due to declining business investment growth and a larger-than-expected current account deficit, which may exert downward pressure on the pound. 

Technical Analysis: 

On the hourly chart, GBP/JPY is in an uptrend but has formed a double top pattern, with sellers attempting to break the neckline at 203.199. Success in breaking this level would target the next supports at 203.094 and 202.960, near the 100-period moving average. Failure to hold this level could extend the decline to 202.813. There is a divergence between the RSI and the price, indicating a potential loss of bullish momentum. 

Alternative Scenario: 

If buyers manage to defend the neckline support, the immediate resistances are at 203.346 and the double top peak at 203.585. A break above the latter would invalidate the bearish reversal pattern. 

Market Overview and Key Levels 

Resistance Levels: 

• Resistance 2: 203.585 
• Resistance 1: 203.346 

Current Price (at the time of analysis): 203.206 

Support Levels: 

• Support 1: 203.094 
• Support 2: 202.960 
• Support 3: 202.813 

Impactful Events: 

Today’s key report is the US Personal Consumption Expenditures (PCE) Index, the Federal Reserve’s preferred inflation measure. Persistent inflation could delay rate cuts and support the dollar. This data will be critical in shaping market sentiment and could indirectly influence GBP/JPY movements. 

Oscillators and Risk Warnings: 

• RSI (Relative Strength Index): Neutral, indicating no immediate overbought or oversold conditions. 
• MACD (Moving Average Convergence Divergence): Mixed, suggesting indecision in momentum. 
• Moving Averages: Mixed, reflecting current market uncertainty. 

Conclusion: 

GBP/JPY is currently at a critical juncture, with sellers aiming to break the neckline of a double top pattern amid mixed economic signals from Japan and the UK. A break below 203.199 could lead to further declines, targeting support levels at 203.094, 202.960, and 202.813. However, if buyers defend this level, the pair could test resistances at 203.346 and 203.585. 

Traders should closely monitor the upcoming US PCE Index report, as it will provide crucial insights into inflation trends and potential monetary policy shifts, impacting broader market dynamics. By staying attuned to these indicators and key technical levels, investors can navigate the current market environment more effectively.