Pound to Yen Technical Analysis

Pound to Yen technical analysis
.10 Apr 2024
author avatar image Andreas Thalassinos

Table of Contents

Briefing

Title: Pound to Yen Technical Analysis
Financial instrument: GBPJPY
Timeframe: Daily
Session: Tokyo
Trend: Up
Trend Confirmation: Exponential Moving Average(EMA), Moving Average Convergence/Divergence(MACD), Relative Strength Index (RSI), Momentum
Momentum: MACD above its Signal Line
Support Levels: 190.038, 187.976, 185.159
Resistance Levels: 193.533, 194.771, 196.480
Trading Strategy: Buy on Breakouts, Buy on Dips

High Impact Economic Events


Wednesday, 02:00 am (GMT+0): Official Cash Rate (NZD)
Wednesday, 12:30 pm (GMT+0): Core CPI m/m (USD)
Wednesday, 01:45 pm (GMT+0): Overnight Rate (CAD)
Thursday, 12:15 pm (GMT+0): Main Refinancing Rate (EUR)
Thursday, 12:30 pm (GMT+0): Core PPI m/m (USD)
Thursday, 12:30 pm (GMT+0): PPI m/m (USD)
Thursday, 12:30 pm (GMT+0): Unemployment Claims (USD)
Thursday, 05:01 pm (GMT+0): 30-y Bond Auction (USD)
Friday, 06:00 am (GMT+0): GDP m/m (GBP)
Friday, 02:00 pm (GMT+0): Prelim UoM Consumer Sentiment (USD)

Trend Analysis of Pound to Yen

GBPJPY price chart with technical tools and potential support and resistance levels.

The price of GBPJPY has exhibited a significant upward move since December 14, 2023. After reaching a daily low of 178.335, the price rebounded to form a technical reversal to the upside, commonly referred to as a failure swing. This reversal pattern was characterized by a higher trough at 178.776, followed by a breach of the peak at 184.175, which paved the way for a bullish trajectory. During this period, the bulls were able to pull the price higher to 193.533 and established the price of GBPJPY above the dynamic support of the 50-period Moving Average.

This recent price action suggests a bullish sentiment in the market, with a possible correction to the downside. These developments indicate that further upward momentum may be in store for GBPJPY. However, the bullish trend may be subject to correction in the near term.

Indicators and Oscillators Analysis

The Relative Strength Index (RSI) is hovering above its 50 baseline, indicating that the pair has moved to an upward trajectory. Also, it has recently moved out of the overbought territory. However, traders should exercise caution, as RSI alone may not be a reliable indicator. Additionally, the Bollinger Bands suggest tightening volatility as the Upper and Lower Bands converge in prices. At the same time, the Middle Band serves as immediate support to any potential downside correction. The Exponential Moving Average and the Moving Average Convergence/Divergence (MACD) also confirm the upward movement. In particular, prices are trading above the Moving Average line, and MACD is above the zero baseline. Additionally, the Stochastics have moved into the overbought zone, above 80. Moreover, the MACD oscillator indicates a bullish momentum, with the MACD above the Signal line.
On the other hand, the Momentum oscillator displays a negative divergence with price.

Key Support Levels

In the current market scenario, the bulls hold the reins of the GBPJPY, and the price of GBPJPY will likely continue to rise. The initial support level is seen at 190.038, and a further decline may lead to a breach of this level. If that happens, the next support level at 187.976 could come into play. The violation of this level may indicate further potential for a downturn, and the next significant support level is estimated to be 185.159. It is crucial to closely watch these support levels to gauge GBPJPY’s future direction.

S1–>190.038
S2–>187.976
S3–>185.159

Key Resistance Levels

If the bulls maintain control of the market, a potential correction to the upside may yield gains in the future. However, resistance is likely to arise at various levels. The initial resistance level is estimated to be approximately 193.533; subsequently, resistance is projected to be witnessed at 194.771 and 196.480, respectively. These levels of resistance could pose a challenge to the market’s upward momentum. Nonetheless, with careful consideration of market trends and strict risk management tools, it is possible to navigate these obstacles and mitigate risks.

R1–> 193.533
R2–> 194.771
R3–> 196.480

Trading Strategy for Pound to Yen

Based on the technical analysis, traders may consider adding to their positions above the recent high of 193.533, which was marked on March 20. On the other hand, aggressive traders may explore short-term buying opportunities on dips toward support levels and the Middle Band, with tight stop-loss orders to manage risk effectively. Additionally, if the bullish momentum persists and candlesticks close above the Upper Bollinger Band, indicating a continuation of the uptrend, traders may take advantage of the rising prices with long positions.

Conclusion


In conclusion, the technical analysis of the GBPJPY suggests a bullish outlook with the possibility of a short-term correction to the downside, with the currency pair testing critical levels. Traders should closely monitor price action around key support and resistance zones and relevant technical indicators to identify potential trading opportunities and manage risk effectively in the current market environment.

author avatar image
Andreas Thalassinos

Experienced educator with a demonstrated history of working in the financial services industry. Skilled in Technical Analysis, Market Risk, Asset Management, Stock Market, and Trading Systems. Strong professional with a MSTA by Society of Technical Analysts (UK), CFTe and MFTA focused in Master of Financial Technical Analysis from International Federation of Technical Analysts (USA).