The GBP/JPY currency pair continues to face downward pressure, with bears firmly in control. This week, the pair has dropped to a 1.5-week low, currently trading near 211.75, down 0.25% for the day. The British Pound (GBP) is underperforming due to the ongoing UK political crisis, which is a significant factor in the pair's decline. However, the Japanese Yen (JPY) is also weaker, influenced by economic risks from the Middle East conflict and a stronger US Dollar (USD). This dynamic creates a challenging environment for bearish traders, who are hesitant to place aggressive bets. Despite this, the technical setup suggests that the GBP/JPY pair is headed lower.
The pair is trading below the 100-period Simple Moving Average (SMA) and the 50% Fibonacci retracement level of the February-April upswing. Overhead resistance is clustered at the 38.2% Fibonacci level at 212.97 and the 23.6% level at 214.32, indicating that any rallies are likely to be short-lived. Momentum indicators, such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), further reinforce the negative tone, with the RSI in oversold territory and the MACD below zero. This suggests that downside pressure persists, even if short-covering bounces occur.
To ease immediate pressure, the GBP/JPY pair needs to reclaim the 50.0% retracement level at 211.88. Further resistance is seen at 212.97 and the 100-period SMA at 213.92. The 23.6% retracement level at 214.32 is a more distant cap. On the downside, initial support is at the 61.8% Fibonacci retracement level at 210.79, followed by a deeper support band at the 78.6% level at 209.23. A break below this level would expose the prior swing low anchor at 207.26.
The Japanese Yen's performance this week is also noteworthy. The table shows the percentage change of the JPY against major currencies, with the JPY being the strongest against the British Pound. This further highlights the JPY's weakness and its impact on the GBP/JPY pair. The heat map provides a visual representation of the percentage changes between major currencies, offering a comprehensive view of the currency dynamics.
