The GBP/JPY pair experienced a notable climb, reaching fresh year-to-date (YTD) highs at 174.68, only to encounter a subsequent pullback that brought the exchange rate closer to the 174.10s level.
This retracement was prompted by a risk-on sentiment, fueled by expectations of a dovish stance from the US Federal Reserve (Fed) amidst ongoing geopolitical concerns, such as the resolution of the US debt-ceiling issue.
As a result, higher-beta currencies remained well-supported, while safe-haven counterparts faced persistent pressure. Currently, the GBP/JPY is trading at 174.12, representing a modest increase of 0.18%.
Technical analysis of GBP/JPY: A bullish outlook
From a technical perspective, the GBP/JPY pair still exhibits an upward bias, evident in the price action that has widened the gap between the Tenkan-Sen and Kijun-Sen lines below the exchange rate. Moreover, the fact that price action remains above the Ichimoku cloud further reinforces the bullish signal.
However, it’s worth noting that the GBP/JPY rally has encountered resistance from an upward sloping trendline originating from the highs observed on May 2.
Additionally, a support trendline, drawn from the lows of April and May, suggests the formation of a rising wedge pattern, indicating the potential for further downward pressure.
In the event that the GBP/JPY drops below the 174.00 level, the subsequent support can be expected around the Tenkan-Sen at 172.95. Breaching this support level would expose the previous high from 2022, which now acts as support at 172.13, before testing the daily high from April 28 at 171.16.
Conversely, if the uptrend continues and the GBP/JPY clears the YTD high at 174.68, we could witness a rally towards the 175.00 mark, followed by the 2016 high at 177.37.
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