- Weaker than estimated UK economic data and UK’s new budget fueled UK’s recession fears.
- A break below the 200-EMA officially shifted the GBP/JPY as bearish biased.
GBP/JPY plunged more than 450 pips or 2.93% on Friday, amidst risk-aversion, after PMIs reported by S&P Global showed that the EU and the UK could be headed into a recession. Also, news of a new GBP 161 Billion UK budget to stimulate growth might exert upward pressure on UK Inflation, threatening to deteriorate the already battered economy. At the time of writing, the GBP/JPY is trading at 155.48.
GBP/JPY Price Analysis: Technical outlook
On Friday, the GBP/JPY officially shifted to a bearish bias after tumbling sharply below the 200-day EMA at 160.25, reaching six-month-lows at around 155.33. Due to the size of the collapse, the Relative Strength Index (RSI) accelerated towards oversold conditions, with readings at 25.43, suggesting that the pair might be subject to a mean reversion move.
Nevertheless, if the GBP/JPY drops below the 155.00 figure, a fall towards the March 8 daily low at around 150.97 is on the cards. So the GBP/JPY first support would be the 155.00 figure. Once cleared, the next support would be the January 24 cycle low at 152.90, ahead of the 150.97 mark.
On the other hand, the GBP/JPY’s first resistance would be the 156.00 mark. Break above will expose the May 27 daily low-turned-resistance at 157.87, ahead of the 158.00 mark.