The Bank of Japan has decided to maintain its interest rate at 0.25%, a move that was widely anticipated by market analysts. There remains a prevailing sentiment that the central bank is unlikely to adopt a more hawkish stance in the foreseeable future. On the other hand, the Bank of England is set to meet soon and is expected to keep its interest rate steady at a significantly higher 4.75%. Recent economic data does not suggest a shift towards a dovish outlook for the upcoming year, which could create favorable conditions for a potential long position on the GBP/JPY currency pair.
GBP/JPY Daily Chart Analysis:
The daily chart reveals a strong bullish rally that has emerged from the December lows, although it finds itself encountering resistance at the 2015 highs once again. This level previously acted as resistance in September before the price broke out of an ascending triangle. However, this time, only a modest two-day pullback has been observed. The price found support at the 50-day EMA on Wednesday, and it has since utilized this level as a launchpad, currently trading above Monday's closing price.
With the daily RSI (14) signaling positive momentum, a bullish breakout above the 2015 high seems increasingly likely. Although a bearish divergence is noted on the daily RSI (2), the indicator is not in overbought territory, implying that an upward move could also lead to a resolution of this divergence.
GBP/JPY 1-Hour Chart Analysis:
On the hourly chart, we observe that the weekly R1 pivot has served as resistance alongside the 2015 high. While there was a sharp selloff from these highs on Wednesday, the price has since found support at the 50-day EMA, forming two bullish hammers.
As the RSI (2) is in overbought territory, bullish traders may look for potential dip-buying opportunities within today’s range, particularly near the 195 handle around the 200-day EMA. The bullish bias is maintained as long as prices stay above the 50-day EMA and the 194 handle.
A breakout above the 2015 high would signify a continuation of the bullish trend, bringing attention to the 197 handle, the weekly R2 pivot (197.55), and the November 20th high, which is just below the 198 mark.
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