GBP/JPY PRICE FORECAST: POUND STERLING MIGHT RECOIL AS YEN APPROACHES MAJOR TECHNICAL LEVEL
- GBP/JPY price action has plunged over 300-pips from its recent swing high
- British Pound weakness is starting to look a touch overdone versus the Yen
- The Sterling might bounce back if GBP/JPY can find support around 149.50
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GBP/JPY price action has weakened sharply over the last few trading sessions. In fact, the Pound Sterling now trades roughly 320-pips off its 05 April swing high notched against the Yen. The stretch lower by GBP/JPY seems to be a bit stretched, however, and nearby support could encourage British Pound bulls to stem the bleed.
GBP/JPY PRICE CHART: DAILY TIME FRAME (16 NOV 2020 TO 08 APR 2021)
GBP/JPY currently hovers just above the psychologically-significant 150.00-price level following the latest influx of selling pressure. Though it is possible that recent Pound-Yen weakness is just some healthy profit taking subsequent to the massive 8% rally during the first quarter. This brings to focus a confluence of support around the 23.6% Fibonacci retracement shown on the chart above, which might bolster GBP/JPY price action. Technical support near the 149.50-level is highlighted by the 50-day simple moving average as well.
This area also happens to be roughly underpinned by the bottom Bollinger Band, late-March swing low, and an ascending trendline. Maintaining this layer of defense could see GBP/JPY price action recoil toward its 20-day simple moving average before fresh year-to-date highs come into consideration. On the other hand, invalidating the aforementioned technical support level might be followed by a deeper pullback that pressures GBP/JPY price action toward its 100-day simple moving average.
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
