The GBPJPY currency pair is enjoying a rare bullish session after rising over 0.8% following the release of the positive UK trade data for May earlier on Thursday. The data showed that the GDP year-on-year declined by 0.4% versus the market expectation of a 0.7% decline, while the GDP for the three months ended in May was 0% against the market’s expectation of a decline of 0.1%.
The positive trade data showed the UK economy’s resilience and the raised bets of continued tightening by the Bank of England (BoE) in July. The BoE is widely expected to raise interest rates by 0.25%, but some analysts believe that the central bank could surprise with a larger hike. With the BoE expected to continue raising interest rates in an effort to combat inflation, the Bank of Japan is expected to keep interest rates low. This could put further downward pressure on the Yen and support the GBPJPY pair.
The 4H chart shows that the bulls recently broke above a descending channel trading pattern, and should the momentum persists, a trading opportunity could exist at the 181.495, just above the current market price towards, towards the 182.226 price level, just below the golden ratio and the 50-SMA (blue line). A sustained push above the golden ratio could confirm the bullish momentum, offering trading opportunities as the bulls charge towards the 183.237 resistance level, a fraction of the major resistance level of 184.015 (green line).
However, a throwback towards the channel could find significant support at the 23.60% Fibonacci retracement level, which would act as a level of significance for the market. A push below the level would confirm the failed breakout, triggering a sell-off to lower levels, with the 180.149 and 179.495 price levels likely to act as levels of significance for the bears.
The encouraging GDP growth from the UK has provided support for the Pound, while the Yen’s safe-haven demand was dampened by the easing inflationary pressure in the US, leaving the cross on course for the first session of gains in six. However, the bulls’ charge could be tested by sentiment towards a potential Japanese government intervention, leaving the currency pair poised for increased volatility in the coming sessions.
Sources: TradingView, Reuters, Trading Economics.
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