- GBP/JPY extends decline near 202.20 in early European trading on Tuesday, down 0.45% on the day.
- The pair maintains a negative stance on the 4-hour chart, with the RSI indicator bearish.
- The key support level emerges at the psychological mark of 202.00; the bullish barrier is seen at 203.16.
The GBP/JPY pair remains under some selling pressure around 202.20 on Tuesday during the early European session. The risk-off environment and the growing speculation that the Bank of Japan (BoJ) will hike rates next week support the Japanese Yen (JPY) and create a headwind for the GBP/JPY.
Technically, GBP/JPY maintains an unchanged bearish outlook on the 4-hour chart as it remains below the key 100-period exponential moving average (EMA). Moreover, the Relative Strength Index (RSI) is in bearish territory below the mid-50 line, suggesting that further losses cannot be ruled out.
The key support level will emerge at the psychological mark of 202.00. A decisive break below this level will pave the way towards 201.14, a low of June 24. Further south, the next containment level lies at 200.48, a low of June 21.
On the upside, the immediate resistance level for the cross is seen at 203.16, a high from July 22. The crucial bullish barrier to watch is the 204.00-204.10 region, which represents the confluence of the psychological level, the 100-period EMA, and the upper boundary of the Bollinger Band.
GBP/JPY 4-hour chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the spread between Japanese and US bond yields, and risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key to the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its major currency peers. This process has been exacerbated more recently by a growing policy divergence between the BoJ and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s stance of maintaining an ultra-loose monetary policy has led to an increase in policy divergence with other central banks, in particular with the US Federal Reserve. This favours the widening of the spread between US and Japanese 10-year bonds, which favours the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency due to its perceived reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
