- GBP/JPY is in the red today, not far from its recent high
- It continues to hover inside a rectangle structure
- Momentum indicators are in waiting mode for the next key events
GBP/JPY is trading lower today as the market is digesting the latest developments in the Middle East and the lower Japanese inflation prints, and also prepares for next week’s BoJ meeting. Following an aggressive pace of ascension, GBP/JPY appears to have settled inside a rectangle with the upper boundary set by the July 21, 2005 low of 192.57. The barrage of verbal interventions by Japanese officials could have also contributed to this range trading activity, which is clearly depicted in the momentum indicators.
More specifically, the Average Directional Movement Index (ADX) remains stuck below its 25-threshold, signaling a trendless market. Similarly, the RSI continues to hover around 50, confirming the current indecisiveness of market participants. More importantly, the stochastic oscillator is trying to edge above its moving average, but such a move needs to pick up pace in order to be seen as a strong signal.
Should the bulls remain confident, they could test the resistance set by the July 21, 2005 low at 192.57 and then try to lead GBP/JPY back above the January 2, 2024 ascending trendline. They could then have the chance to record a new 2024 high, above the current 193.52 high, with the next plausible target being in the 195.00 area.
On the other hand, the bears are desperate to regain market control and gradually push GBP/JPY towards the 189.61-190.66 range, which is populated by the March 31, 2004 low and the 50-day simple moving average (SMA). If successful, they could then have a go at testing the support set by the 185.65-187.68 area that is defined by the August 22, 2023 high and the 100- and 200-day SMAs.
To sum up, range trading in GBP/JPY continues as market participants have taken a back seat due to the geopolitical developments monopolizing the newsflow.