Pound-yen reaches fresh 16-year highs
GBPJPY reached a fresh 16-year high on 17 June above ¥201. Among the factors affecting the yen negatively are the ongoing strong divergence in monetary policy with most major, advanced economies, generally weak demand and inflation in Japan and a high ratio of debt to GDP. However, the rhetoric from the Bank of Japan (‘the BoJ’) shifted at its last meeting, with Governor Kazuo Ueda warning that currencies’ movements have a huge impact on productivity and the overall economy. The BoJ also announced that it will release its plan for winding down purchases of bonds at its next meeting in July.
Sentiment on the pound is more positive as the UK exited its technical recession according to preliminary GDP data for the first quarter. The strong likelihood of a landslide victory for the Labour Party in 4 July’s general election is also generally positive for the economic outlook in the UK.
Although momentum upward has been lower in the last couple of weeks, the obvious explanation for that is the presence of an extremely strong psychological resistance around ¥200. The fundamental situation hasn’t changed significantly in the last few weeks while overall the technical picture seems to be more positive. There’s no longer an overbought signal from either the slow stochastic or Bollinger Bands. While ATR is low relative to May’s readings, it hasn’t reached a bottom.
The 20 SMA seems to be the main technical reference for the time being; the price was reluctant to move below there in the first half of June. It’s difficult to tell where the next resistance might be after ¥200 because the price hasn’t been this high for many years. July 2008’s ¥216 is possible, but this is really quite far away and the BoJ would be very likely to intervene again before that area could be reached. To the downside, ¥198 was 28 April’s close and 4 June’s close, so this might be a short-term support if the price breaks below the 20 SMA.
This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.
Sentiment on the pound is more positive as the UK exited its technical recession according to preliminary GDP data for the first quarter. The strong likelihood of a landslide victory for the Labour Party in 4 July’s general election is also generally positive for the economic outlook in the UK.
Although momentum upward has been lower in the last couple of weeks, the obvious explanation for that is the presence of an extremely strong psychological resistance around ¥200. The fundamental situation hasn’t changed significantly in the last few weeks while overall the technical picture seems to be more positive. There’s no longer an overbought signal from either the slow stochastic or Bollinger Bands. While ATR is low relative to May’s readings, it hasn’t reached a bottom.
The 20 SMA seems to be the main technical reference for the time being; the price was reluctant to move below there in the first half of June. It’s difficult to tell where the next resistance might be after ¥200 because the price hasn’t been this high for many years. July 2008’s ¥216 is possible, but this is really quite far away and the BoJ would be very likely to intervene again before that area could be reached. To the downside, ¥198 was 28 April’s close and 4 June’s close, so this might be a short-term support if the price breaks below the 20 SMA.
This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.
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