The GBP/JPY currency pair has encountered challenges in extending its modest intraday gains beyond the crucial 200-day Simple Moving Average. The British Pound is currently facing pressure due to a slight strengthening of the US Dollar, which is acting as a headwind for the cross. Additionally, uncertainties surrounding potential interest rate hikes by the Bank of Japan (BoJ) are keeping Japanese Yen bulls on their toes, providing some measure of support to the currency pair.
On Tuesday, the GBP/JPY cross attracted sellers, retracting over 100 pips from a daily peak near 159.35. The currency pair reached a fresh low during the early European session, trading just below the 192.00 level and down approximately 0.20% for the day. The continued gains in the US Dollar are largely attributed to remarks made by the Federal Reserve Chair, which have increased pressure on the British Pound. The decline in GBP does not appear to be linked to any significant fundamental indicator, limiting its potential to extend losses, especially given the expectations that rate cuts by the Bank of England may occur at a slower pace compared to those in the US and Eurozone.
In Japan, the new Prime Minister has expressed a cautious stance regarding interest rate increases and has announced plans for a general election on October 27. This political backdrop, combined with rising optimism over potential stimulus efforts from China, has weakened the safe-haven nature of the Yen, indirectly supporting the GBP/JPY rate. Despite the release of the final UK Manufacturing PMI, which showed a slight revision upward, market movements remained subdued.
Given these conditions, market participants may want to exercise caution before expecting significant downside movement in the GBP/JPY cross. The technical indicators, including repeated failures to maintain above the important 200-day SMA and the recent formation of a ‘Death Cross’ on the daily chart, suggest that aggressive bullish strategies may require more substantial confirmation.
