The GBP/JPY cross turned positive for the day and erased losses, after recovering from the lowest level in almost three weeks. It bottomed at the beginning of the week at 160.63 and recently hit a fresh daily high at 161.91.

The recovery of the cross took place as GBP/USD moved off multi-year lows and as USD/JPP climbed back to the 140.50 area. The yen remains weak even as European stocks drop sharply.

The pound was unaffected following the result of the Tory race that offered no surprises. Liz Truss will become the next prime minister. “I will deliver a bold plan to cut taxes and grow our economy”, said Truss in brief acceptance speech. Regarding the energy crisis she said she will deal “with people’s energy bills but also dealing with the long-term issues we have on energy supply.”

Technically, GBP/JPY is moving sideways around 161.50 since mid-August. A close below 161.00 should point to more losses while on the upside, a break above 162.50 would increase the odds of a more sustainable recovery targeting 164.00 initially.

An upward sloping support line from May 12 restricts short-term GBP/JPY declines near 161.00. The recovery moves, however, need validation from 161.85-90 resistance confluence comprising the 21-DMA and a five-week-old descending trend line.

163.62 near the upper trend line after the last two bearish impulses of a correction of higher degree, the GBPJPY market will trace towards the aforementioned level before continuation of another bearish impulse down to complete the 5 wave impulse of lower degree of trends. 

GBPJPY Expected For a Push Up Prior to a Drop

Sep 05 2022