The hotter-than-expected British unemployment data aided the continuation of the GBPJPY currency pair bulls’ dominance over the bears, which have seen the currency pair experience just one red trading session out of the last nine. The pair currency is trading 0.15% higher during the trading session after the data from the UK showed that the unemployment rate unexpectedly rose to 3.6% from the widely expected flat 3.5%. The unemployment data elevated investor sentiment that the BoE would continue hiking the rate in an effort to curb inflation which helped push the British Pound higher.
The continuing economic divergence in the United Kingdom’s favour in the face of a loose-monetary policy from the Bank of Japan could continue to weigh down on the Japanese Yen while pushing the GBPJPY currency pair, also known as “The Beast”, higher.
The 4H chart shows that The Beast has formed a rising wedge as the bears look to intensify their fight back against the bulls’ dominance since the low of 158.305. With the bulls having enjoyed dominance against the bears, the 166.942 could pose an obstacle towards the dominance and market reaction around the point could determine the direction of the pair.
For the extension of the bulls’ rally, the price action would need to sustainably break above the 166.942 psychological level. In the case of an extended rally, the bulls would likely test the resistance level at 167.476 but would need significant volume if they are to push the price action towards the 168.515 resistance level.
However, failure to sustainably break above the 166.942 psychological level could push the price below, with the lower trendline of the rising wedge acting as immediate support. A break below the lower trendline would bring the 166.854 into play. A break below 166.854 could indicate the presence of sellers, bringing the 50-EMA and the 166.295 support level into play.
The Beast is synonymously known as a very volatile currency pair, and with the macroeconomic indicators from both economies due to be released this week, the pair’s traders should be wary not to overexpose themselves. Nevertheless, a short-term trading opportunity could exist as the price action breaks above 167.476. However, barring a sell-off, The Beast should avoid 166.295 if it hopes to continue its rally.
Sources: TradingView, Reuters, Economies.com.
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