The GBPJPY currency pair is currently trending up following a brief market correction during Tuesday’s trading session as the volatility of risk appetite of the Forex market continues to weigh heavily on the pair. The Japanese Yen selloff, as investor risk appetite swung towards riskier assets with the easing of the banking industry fears, pushed the GBPJPY currency pair higher and is currently trading at a premium of 1.67% to the week’s opening level.
On the other hand, the Bank of England (BoE) has echoed the need to fight high inflation levels, and that further interest rate hikes could be expected. The steadfast focus of the BoE and the possibility of further monetary policy tightening could help British Pound continue elevation. The safe-haven properties of the Japanese Yen in the face of a crisis could help limit the upside as investor factor in the current volatility of the market, and the pair could continue its swings in the short term.
The price action of the currency pair, also known as “The Beast”, is currently trading around its 50-day moving average as the bulls and the bears continue to scuffle for supremacy. The daily chart shows that the scuffle for dominance of the pair has eventually formed a symmetrical triangle pattern, and whoever is dominant in the short term could be awarded a breakout in their direction. Major resistance and support were also established at 172.107 and 150.975, respectively.
The 4H chart shows that The Beast has formed a descending broadening wedge pattern primarily driven by the recent high volatility of investor risk appetite. For the bullish sentiment, a short-term trading opportunity could exist if the price action breaks through the upper trendline and pushes towards the resistance level at 163.003. However, the declining volume could indicate that the rally is losing its steam, and if it can move above the initial resistance level, the bulls could find it difficult to push it towards the next resistance level at 163.739.
The bears could see the declining volume as their opportunity to regain control in the short term and pull back the price action. If the bears regain control, the 50-day moving average could act as the first obstacle for bearish rally confirmation. If the price action pushes above the moving average, then a short-term trading opportunity could exist at the support level of 162.211 and, possibly, at the support level of 159.207.
With the noise surrounding the banking industry primarily driving recent market fluctuations not thoroughly subdued, investors should factor in the high volatility nature of the currency pair in their short-term trading for the pair. Even though a possibility of retracement exists, if the 162.211 support level holds, then a short-term trading opportunity could exist at the resistance level of 163.003.
Sources: TradingView, CNBC, Trading Economics.
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