- The GBP/JPY continued its rally in the week, up some 2.54%.
- The market sentiment is upbeat, increasing demand in the FX market for risk-sensitive currencies like the British pound.
- GBP/JPY Price Forecast: Bullish biased, though it would need GBP bulls to hold the spot above the 200-DMA.
As the Asian session begins, the GBP/JPY rises some 0.66%, trading at 153.42 during the day at the time of writing. The market sentiment is upbeat, triggering demand for risk-sensitive currencies. Covid-19 news from the UK Health Secretary saying that people infected with the newly discovered Omicron strain were 50% to 70% less likely to require hospitalization, improved the market mood. Additionally, the US Food and Drug Administration (FDA) approved Pfizer and Merck Covid-19 treatment pills, which could be used in high-risk patients.
That increased market participants’ demand for riskier assets. In the FX market, appetite for AUD, NZD, GBP, and CAD, increased, as all are part of risk-sensitive currencies. The laggards of the session are the safe-haven and low-yielders like the USD, the CHF, and the JPY.
In the last three days, the British pound has appreciated some 2.45% against the Japanese yen, breaking on its upward move, crucial resistance levels, like the 200, the 100 and the 50-day moving averages (DMAs), which were previous resistance levels, now turned support, once the spot price is above them.
GBP/JPY Price Forecast: Technical outlook
Now that the GBP/JPY is trading above the 200-DMA, the pair is bullish biased, though downside risks remain. Nevertheless, the break of a downslope trendline on December 21, around the 150.00 area, gave GBP bulls enough strength to challenge the DMA’s above the spot price.
To the upside, the first resistance would be the psychological 154.00 level. A decisive break of that level would send the GBP/JPY pair upwards, with the November 17 swing high at 154.75, followed by the November 4 daily high at 156.25.
On the flip side, the GBP/JPY first support would be the psychological 153.00. The breach of the latter would expose crucial support levels like the December 16 daily high, previous resistance-turned-support at 152.63, followed by the December 22 daily low at 151.10.