The GPYJPY currency pair is currently trading around the five-week as the pair continues to move higher, primarily driven by the current market sentiment surrounding the US banking industry and a potential rate hike pause by the US Fed in the wake of the recent banking turmoil in the US and Europe. The currency pair is on course to finish the week on the green and is currently trading at a premium of 3.29% from its week open as the increased risk appetite helped the British Pound continue to regain some of the ground lost to the Japanese Yen in the previous weeks.
The easing of the banking industry stress fears depreciated the Yen as investors shifted their investment focus away from the safe-haven currency towards the riskier assets. The focus will now turn to the Bank of Japan (BoJ) and its yield curve control policy for the potential to limit the decline of the currency. As an increase in interest rates around the world puts negative pressure on the Yen, the currency could find support if investors price in a potential Fed rate pause after the PCE Price Index later today.
Technical
The price action of the currency pair, also known as “The Beast”, is currently upward supported by a steep upward trendline. Suppose the price action respects the trendline, then the price action could look to test the psychological level at the 28th of February 2023 high of 166.007, a level of interest for the bulls. A short-term trading opportunity could exist for the bulls as the price action breaks through the resistance level at 166.007. A sustained breakthrough above the psychological level could trigger a bull’s run towards the next resistance level at 167.012.
A significant breakthrough below the trendline could bring the support level at 163.739, a level of significance for the bears, into play. A breakthrough below the support level could indicate the presence of sellers, and the selling momentum could push the price towards 163.003, even though the bears’ run could face increased friction.
Summary
Due to the high volatility of the currency and the current tentative market condition, it could pay investors to keep their position size reasonable. Nevertheless, a short-term trading opportunity could exist at the resistance level of 166.007, with the next opportunity above the 167.012 price level.
Sources: TradingView, Reuters, Investing.com.
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