GBPJPY has experienced notable upside momentum since bottoming out in early April, driven by a combination of technical strength and contrasting macroeconomic dynamics between the UK and Japan. As the pair trades near multi-week highs, market participants are closely watching for signals of either trend continuation or reversal. The UK economy shows signs of recovery, bolstered by upgraded IMF forecasts and policy reforms, while Japan contends with rising inflation, shrinking GDP, and heightened vulnerability to external shocks. This backdrop sets the stage for a technically driven market, with key support and resistance levels offering insight into potential price action in the sessions ahead.
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Chart Analysis
Since establishing a low at 184.366 on April 9, GBPJPY has appreciated by over 6% from trough to peak before finding initial support near the 20-period Exponential Moving Average (EMA). A decisive break below the recent swing low at 191.886 would likely signal vulnerability to further downside pressure.
At present, the pair continues to trade above both the 20- and 50-period EMAs, underscoring sustained bullish momentum. This technical bias is further supported by key indicators: the Momentum Oscillator remains above the 100 mark, and the Relative Strength Index (RSI) is holding firm above the 50 level—both indicative of ongoing buying interest.
That said, the emergence of a Shooting Star candlestick pattern on the chart introduces a note of caution. This formation suggests diminishing upside momentum and raises the risk of a short-term consolidation or potential reversal.
Key Resistance Levels
Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:
196.398: The initial resistance level is set at 196.398, which mirrors the daily high reached on May 29.
199.186: The second resistance level is seen at 199.186, which represents the 161.8% Fibonacci Extension drawn from 196.398 to 191.886.
203.698: The third price target is identified at 203.698, corresponding to the 261.8% Fibonacci Extension drawn from 196.398 to 191.886.
208.098: An additional price target has been established at 208.098.
Key Support Levels
Should the sellers take market control, traders may consider the four potential support levels listed below:
193.015: The initial support level is seen at 193.015, corresponding to the weekly Pivot Point, PP, estimated using the standard methodology.
191.886: The second support level is estimated at 191.886, representing the swing low from May 22.
189.157: The third support level is identified at 189.157, reflecting the 161.8% Fibonacci Extension drawn from 191.886 to 196.398.
184.366: An additional downside target is 184.366, mirroring the low point marked on April 9.
Fundamentals
The International Monetary Fund (IMF) has upgraded its UK growth forecast for 2025 to 1.2%, up from 1.1%, citing a stronger-than-expected economic recovery. However, the IMF cautioned that escalating global trade tensions—particularly from planned US tariffs—could trim UK growth by 0.3 percentage points next year due to uncertainty, weaker demand from trading partners, and direct tariff impacts.
Despite this, the IMF maintained its 2026 growth projection at 1.4%, noting that UK government reforms to planning rules and infrastructure investment could bolster long-term potential. The Fund also suggested the Bank of England continue gradual interest rate cuts following its recent move to 4.25%.
On the other hand, Japan is sliding toward stagflation faster than the U.S., with rising inflation (3.6%) and a shrinking economy (–0.7% Q1 GDP). Weighed down by Trump-era tariffs, policy constraints, and weak demand for government bonds, Tokyo faces limited options to counter the downturn. With a national election looming, Japan’s economic and political risks are mounting.
Conclusion
GBPJPY remains in a technically bullish structure, supported by favorable UK fundamentals and contrasting economic headwinds in Japan. However, caution is warranted as technical patterns suggest the potential for short-term exhaustion. With several high-impact global economic releases on the horizon and geopolitical uncertainties persisting, traders should remain vigilant for shifts in sentiment. Key support and resistance levels outlined in this analysis will be critical in guiding near-term price action as the market digests both technical signals and evolving macroeconomic developments.
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