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Technical Analysis – GBPJPY returns to pre-intervention levels

- Achilleas Georgolopoulos

  • GBPJPY tries to record another red candle, well below its recent record high level

  • The BoJ intervenes again since the Fed remains concerned about inflation

  • Momentum indicators are mixed, stochastics acknowledge the bearish pressure

GBPJPY is hovering around the busy 191.47-192.57 range and far below its new 16-year high of 200.50. The market is digesting the repeated BoJ interventions with the latest action most likely caused by the Fed’s unwillingness to open the door to rate cuts. Japanese authorities could stick with their plan if yen remains under pressure.

Momentum indicators have taken notice of these market interventions. More specifically, the Average Directional Movement Index (ADX) is trading above its 25-threshold, but it is signaling that the recent bullish trend has probably run its course. Interestingly, the RSI has returned to its midpoint, but it appears unable to dip below it and record a new 4-month low.

More importantly, the stochastic oscillator has broken aggressively below its moving average and it is edging towards its midpoint. Should this move continue, it would be seen as a strong bearish signal.

Should the bulls remain confident, they could try to regain market control and push GBPJPY towards the June 24, 2015 high at 195.87. They could then stage a rally towards the 198.59 level and possibly set their eyes on a much bigger prize - the April 29, 2024 high at 200.50.

On the other hand, the bears are trying to take advantage of the repeated BoJ interventions and push GBPJPY below the 191.47-192.57 area, which is populated by the July 21, 2005 and the 50-day simple moving average (SMA), as well as the January 2, 2024 ascending trendline. They could then test the support set by the 188.21-189.61 range and, if successful, pave the way for the busier 186.25-186.75 area.

To sum up, GBPJPY remains at the mercy of the BoJ with some key support levels coming up and possibly testing the bulls’ commitment.

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