A rise in risk appetite pushed the GBPJPY to a three-month high during the previous session and the British pound may continue to push higher against its lower-yielding counterpart as investors move into higher-yielding assets however, as the Bank of England holds a dour outlook for growth and inflation, fundamental headwinds are likely to weigh on the exchange rate going forward.
Currency Pair: GBP/JPY
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis Update
The GBPJPY slipped lower during the overnight session, and may continue to fall lower over the next few hours of trading to test 141.90-142.00 to for short-term support. Meanwhile, a break below this level should lead the pair to retrace the rally from earlier this week, which could lead the pair to close the gap from the 120 SMA. However, as the RSI approaches oversold territory, we may see the Japanese yen give back as investors raise their appetite for higher-yielding assets, and may continue to trade within a broad range over the remainder of the week. Nevertheless, the fundamental event risks scheduled for the next 24 hours may call for a change in our outlook.
Analysis
A rise in risk appetite pushed the GBPJPY to a three-month high during the previous session and the British pound may continue to push higher against its lower-yielding counterpart as investors move into higher-yielding assets however, as the Bank of England holds a dour outlook for growth and inflation, fundamental headwinds are likely to weigh on the exchange rate going forward. After reaching a high of 165.11 on 10/30, the pound-yen slipped to a low of 118.83 in January, but has pushed higher during the week to break above short-term resistance at 141.90-142.00 (50.0% Fib), and may continue to trend higher over the week as global policy makers employ all of their available tools to restore confidence in the financial markets. However, as economists forecast a global recession for 2009, fears of a deepening economic downturn is likely to hold the GBPJPY in a broad range over the near-term as the financial crisis continues to drag on investor sentiment. Over the next few hours of trading, we may see the pair work its way towards the 50.0% fib to test for short-term support however, a break below this level could lead the pair to retrace the rally from earlier this week, and may work its way towards 139.64 (120 SMA) over the remainder of the week. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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