The ultra-loose monetary policy employed by the Bank of Japan has helped the GBPJPY currency pair, also known as the Dragon, soar to multi-year highs. The cross trading is at a seven-year high as market sentiment continues to weigh on the Japanese Yen against the strengthening British Pound, with the BoE firm on its stance to put its fight against the sticky inflation at the forefront of its course.
The UK CPI data released last week, which showed that the UK inflation for April fell less than expected, raised bets on a more aggressive BoE monetary policy path, helping exacerbate the current monetary policy divergence and sending the cross to newer heights.
The cross has formed an ascending channel trading pattern as the bulls use the weakened Yen to break through new multi-years. The market is bullish and biased towards the cross, with the price action trading above the 50-EMA (blue line) and the daily pivot point. Therefore, the bulls could be confident in pushing the price higher, with the 176.129 resistance level the likely first target for the bulls. The fall of the 176.129 price level would boost the bulls’ charge towards the 177.533 resistance level; however, the bulls running higher would need to be supported by relevant economic indicators to reclaim the 10th of April high.
For a bear case, the price action would need to sustain a move below the daily pivot point to bring the 173.898 and 172.551 support levels within the bear’s radar. The 50-EMA and the 23.60% Fibonacci retracement level would act as significant support for any move lower.
The cross is currently under bullish pressure, and with the lack of economic indicators, the bulls could be confident in pushing higher, with the 30th of January 2015 low of 176.129, a probable target in the short term.
Sources: TradingView, Reuters.
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