The GBPJPY currency pair has exhibited a notable shift in momentum, reversing from its October 30 high of 199.793. This reversal, driven by a "failure swing" pattern and supported by bearish technical indicators, underscores a potential continuation of the downward trajectory. While key support levels are being tested, fundamental factors such as the Bank of Japan's cautious approach to rate hikes and the UK's weaker-than-expected GDP data add further complexity to the pair's outlook. Traders remain focused on potential resistance and support levels, as well as macroeconomic developments that could influence future price movements.
Overview
The GBPJPY currency pair has exhibited a notable shift in momentum, reversing from its October 30 high of 199.793. This reversal, driven by a "failure swing" pattern and supported by bearish technical indicators, underscores a potential continuation of the downward trajectory. While key support levels are being tested, fundamental factors such as the Bank of Japan's cautious approach to rate hikes and the UK's weaker-than-expected GDP data add further complexity to the pair's outlook. Traders remain focused on potential resistance and support levels, as well as macroeconomic developments that could influence future price movements.
Key Economic Events
Wednesday 09:00 am (GMT+2) - UK: CPI y/y (GBP)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 09:00 am (GMT+2) - UK: Retail Sales m/m (GBP)
Friday 10:15 am (GMT+2) - Europe: French Flash Manufacturing PMI (EUR)
Friday 10:15 am (GMT+2) - Europe: French Flash Services PMI (EUR)
Friday 10:30 am (GMT+2) - Europe: German Flash Manufacturing PMI (EUR)
Friday 10:30 am (GMT+2) - Europe: German Flash Services PMI (EUR)
Friday 11:30 am (GMT+2) - UK: Flash Manufacturing PMI (GBP)
Friday 11:30 am (GMT+2) - UK: Flash Services PMI (GBP)
Friday 15:30 (GMT+2) - Canada: Retail Sales m/m (CAD)
Friday 16:45 (GMT+2) - USA: Flash Manufacturing PMI (USD)
Friday 16:45 (GMT+2) - USA: Flash Services PMI (USD)
Technical Analysis
Since reaching a peak of 199.793 on October 30, the GBPJPY currency pair has reversed direction, driven by a "failure swing" pattern. Specifically, the peak at 199.546 did not exceed the previous high, leading to prices falling below the key support level 195.350. This decline signals the potential for further reductions. The 50-period Exponential Moving Average (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) reinforce the downward movement. Notably, prices have dropped below the 50-period EMA, the Momentum Oscillator is reading below the 100 threshold, and the RSI is below the 50 baseline, all confirming the downward trajectory.
Potential Upside Targets
Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:
197.414: The initial resistance is 197.414, which represents the weekly resistance, R1, calculated using the standard Pivot Points methodology.
199.793: The second price target is identified at 199.793, corresponding to the high point from October 30.
206.321: The third target is established at 206.321, aligning with the 261.8% Fibonacci Extension drawn from the swing high, 195.959, to the swing low, 189.555.
216.682: An additional price target is estimated at 216.682, which corresponds to the 423.6% Fibonacci Extension drawn from the swing high, 195.959, to the swing low, 189.555.
Potential Downside Targets
Should the sellers maintain market control, traders may consider the four potential support levels listed below:
195.360: The first level of support is estimated at 195.360, representing the swing low from October 31 and the 50-period Exponential Moving Average.
192.773: The second support level is determined at 192.773, reflecting the 161.8% Fibonacci Extension drawn from the swing low of 194.282 to the swing high of 199.546.
191.683: The third support level is seen at 191.683, corresponding to the weekly support, S2, calculated using the standard Pivot Points methodology.
188.587: An additional downward target is observed at 188.587, corresponding to the 261.8% Fibonacci Extension drawn from the swing low of 194.282 to the swing high of 199.546.
Fundamentals
The UK pound weakened against both the euro and the dollar following disappointing GDP data. The UK economy contracted by 0.1% in September, below expectations of 0.2% growth, and quarterly GDP growth slowed to 0.1%, down from 0.5% in Q2. Weak industrial production and stagnant service-sector growth contributed to the subdued performance. Analysts expect modest growth over the winter, with potential improvement in 2025 tied to budget effects and job market health. Bank of England rhetoric remains cautious, while US Fed Chair Jerome Powell signaled no urgency for rate cuts. The dollar showed strength but may face a consolidation phase as markets adjust to President Trump's policies.
On the other hand, the yen weakened after Bank of Japan Governor Kazuo Ueda avoided signaling a clear timeline for the next rate hike in a speech on Monday. Ueda emphasized a data-dependent approach, stating that policy adjustments would depend on economic activity, prices, and financial conditions. His cautious tone dampened expectations for a December hike, with markets pricing a 54% probability. The yen dropped 0.5% to ¥155.14 against the dollar, while bond yields declined. Ueda reiterated the BOJ's gradual tightening path but refrained from committing to specific timing, leaving markets uncertain ahead of the December policy meeting.
Conclusion
In conclusion, the GBPJPY currency pair's reversal and continued downward momentum are strongly supported by technical and fundamental factors. While bearish signals dominate the technical landscape, including the "failure swing" pattern and weakening indicators, key economic data and central bank policies will play a pivotal role in determining future price action. Traders should closely monitor upcoming economic releases and central bank communications for potential catalysts that could influence the pair's trajectory in either direction.