GBP/JPY Forecast: Jumps to multi-week high, recovers 191.00 amid notable JPY weakness

• GBP/JPY turns positive for the fifth consecutive day and rises to a near three-week high.
• BoJ Governor Ueda’s cautious comments weigh on the JPY and offer support to the cross.
• The formation of a ‘Death Cross’ on the daily chart warrants caution for bullish traders.

The GBP/JPY pair turns positive for the fifth consecutive day after an intraday drop to the 188.70 area and jumps to a near three-week high during the first half of the European session on Friday. Spot prices regain the 191.00 level in the last hour amid the emergence of some selling around the Japanese Yen (JPY), triggered by the less hawkish comments from Bank of Japan (BoJ) Governor Kazuo Ueda during the post-meeting press conference.

Indeed, Ueda noted that uncertainties surrounding Japan’s economy and prices remain high and that risks of excess inflation have eased to some extent in the wake of recent currency market moves. This, coupled with the underlying bullish sentiment in global financial markets, weakens the safe-haven JPY. Meanwhile, the British Pound (GBP) benefits from the Bank of England’s (BoE) decision on Thursday to keep rates unchanged and reduce its stock of government bonds by another £100 billion over the next 12 months. This, in turn, provides an additional boost to the GBP/JPY cross and contributes to the upward move.

From a technical perspective, oscillators on the daily chart have been gaining positive traction and support the prospects of a further appreciating move. That said, the 50-day Simple Moving Average (SMA) has dipped below the 200-day SMA, forming the ‘Death Cross’ pattern on the daily chart and warranting some caution for bullish traders. Therefore, any subsequent upside move could face stiff resistance near the 50-day SMA, currently near the 191.75 region. This is followed by the 192.00 level, above which the GBP/JPY cross could rally higher, though it is likely to remain capped near the 200-day SMA barrier in the 192.35-192.40 region.

On the other hand, the 190.40-190.35 zone now seems to protect the immediate downside ahead of the psychological 190.00 level and the horizontal support of 189.45. Some follow-through selling could drag the GBP/JPY pair towards the 189.00 level en route towards the daily low, around the 188.70-188.65 region. Failure to defend such support levels will suggest that this week’s nice bounce from the vicinity of the monthly low has come to an end and will pave the way for deeper losses. Spot prices could then accelerate the decline towards the 188.00 round figure before eventually dropping to the 187.35 support zone and the 187.00 level.

GBP/JPY daily chart