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GBP/JPY Bounces From Two Month Lows, Retains Bearish Tonality

GBP/JPY Bounces From Two Month Lows, Retains Bearish Tonality

James Stanley, Contributor
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Talking Points:

- GBP/JPY was hit with a one-two combo of GBP-weakness and JPY-strength, helping the pair to drive down to fresh 2018 lows in what’s been a brutal day of price action.

- Prices have posted a 100+ pip bounce off of this morning’s low; but price action is now finding resistance at a familiar area of 147.03, and if we get a daily close (using 5PM NYC for reference), the door remains open for short-side continuation scenarios.

- Quarterly Forecasts have just been updated, and Q2 forecasts are now available from the DailyFX Trading Guides Page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

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A Storm of Selling Hits GBP/JPY

It’s been a busy day in GBP/JPY, as the pair has traversed as much as 300 pips from today’s open down to this morning’s low. This move appeared to be due in part to a pair of drivers, around both the UK and Japan. In the UK, inflation disappointed again, helping to further temper expectations for higher rates our tighter policy out of the UK. And regarding the Yen – considerable strength showed in the overnight in an apparent move of risk aversion driven by US-China relations. Collectively, this helped to push the pair to fresh two-month lows, with a quick bounce showing off of the 146-handle.

GBP/JPY Five-Minute Chart: 300-Pip Sell-Off, 100 Pip Retracement

gbpjpy 5 minute chart

Chart prepared by James Stanley

At this point, we’ve seen prices revert back to the 147.03 Fibonacci level that’s shown multiple inflections over the past six months. This is the 61.8% retracement of the 2012-2015 major move in the pair, and this helped to produce a double-bottom formation in Q4 of last year. More recently, this level has come back into play, helping to mark the lows in GBP/JPY on two separate occasions earlier in the month of May.

GBP/JPY Hourly Chart: Back to the Familiar 147.03 Fibonacci Level

gbpjpy hourly chart

Chart prepared by James Stanley

Moving Forward

If today’s closing price action remains below this Fibonacci level, the door remains open for aggressive short-term bearish approaches. This would be driven by the prospect of resistance at prior support, looking for a re-test of this morning’s low at 146.00 followed by a potential secondary target around the 2018 low of 145.00.

However, if we do not close below this level on the Daily chart, there’s potential for a deeper retracement, and this exposes a series of prior support levels that could become usable for lower-high resistance. Below, we’re looking at two separate spaces; the first around 147.60 and the second around 148.20. Resistance showing at either of these areas keeps the door open for short-side setups, looking for another reversion to 147.03, followed by targets at 146.00 and 145.00.

GBP/JPY Hourly Chart: Bearish Continuation Potential

gbpjpy hourly chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on GBP and/or JPY? Our DailyFX Forecasts for Q1 have a section specifically for each currency. We also offer a plethora of resources on our GBP/JPY page, and traders can stay up with near-term positioning in GBP/USD and USD/JPY via our IG Client Sentiment Indicator.

--- Written by James Stanley, Strategist for

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.