- GBP/JPY reaches a new YTD high of 172.57, driven mainly by risk-on sentiment and a weaker JPY.
- A negative divergence between GBP/JPY’s price action and the Relative Strength Index (RSI) indicates the potential for a pullback.
- A continued GBP/JPY uptrend could see the pair rally toward 173.00 and potentially reach the 174.00 handle.
GBP/JPY reached a new year-to-date (YTD) high of 172.57 in the European session due to a risk-on impulse and a weaker Japanese Yen (JPY), ahead of a crucial week for the Pound Sterling (GBP). The release of PMIs in the United Kingdom (UK), alongside Wednesday’s update on the Consumer Price Index (CPI) for April, could dictate the GBP/JPY pair direction. At the time of writing, the GBP/JPY is trading at 172.34 after hitting a low of 171.19.
GBP/JPY Price Analysis: Technical outlook
During the last week, a break of a falling wedge opened the door for the GBP/JPY to test the YTD high. As the GBP/JPY price action gathers momentum and records higher highs, the Relative Strength Index (RSI) does not. Hence, a negative divergence between price action-RSI could open the door for a test of the falling-wedge top-trendline before posing a threat to higher prices.
Therefore, the GBP/JPY is set for a pullback. The first support would be at the 172.00 figure, followed by the low of May 22 at 171.19. The break below will expose the 171.00 mark, followed by the 20-day Exponential Moving Average (EMA) at 170.04, closely followed by the falling-wedge trendline.
On the other hand, if GBP/JPY resumes its uptrend, it would need to crack the YTD high of 172.57. Once done, the pair could rally toward 173.00 before reaching the 174.00 handle.
GBP/JPY Price Action – Daily chart
