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$GBP /JPY struggles to capitalize on modest intraday uptick, flat lines below mid-212.00s
GBP/JPY fills the weekly bearish gap opening on Monday, though it lacks follow-through buying.
A firmer USD weighs on the GBP, while geopolitical risks and intervention fears benefit the JPY.
Hawkish BoJ and BoE policy outlooks hold back traders from placing aggressive directional bets.
The $GBP /JPY cross attracts some dip-buyers near the 211.85 region during the Asian session on Monday, though it lacks follow-through and remains confined in a range held over the past week or so. Spot prices currently trade just below mid-212.00s, nearly unchanged for the day amid mixed fundamental cues.
The British Pound (GBP) is pressured by a modest US Dollar (USD) strength, while rising tensions in the Middle East benefit the Japanese Yen's (JPY) safe-haven status. Apart from this, speculations that Japanese authorities would step in to stem further JPY weakness act as a headwind for the GBP/JPY cross. In fact, Japan’s top foreign exchange official and Vice Finance Minister for International Affairs, Atsushi Mimura, said earlier today that the government will consider taking measures on all fronts to contain FX volatility.
Meanwhile, the Bank of Japan (BoJ) maintained its bias toward monetary policy normalization at the end of the March meeting last week and warned that surging Crude Oil prices driven by the Middle East conflict could exacerbate inflationary pressures. The Bank of England (BoE), on the other hand, signaled the potential interest rate hike as early as April due to inflation concerns stemming from the Iran war. This, in turn, holds back traders from placing directional bets around the GBP/JPY cross and leads to range-bound price action.
Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the recent bounce from a technically significant 100-day Simple Moving Average (SMA), around the 207.25 area, or the year-to-date low set in February. In the absence of any relevant market-moving economic data, either from Japan or the UK, fresh developments surrounding the ongoing conflicts in the Middle East will play a key role in influencing the broader risk sentiment and providing some impetus to the GBP/JPY cross.
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March payrolls beat forecasts by a wide margin, boosting the US Dollar.Softer services data failed to offset the impact of strong jobs figures.Traders trimmed dovish Fed bets as Treasury yields edged higher.
The GBP/USD extended its losses for the second straight day, down 0.12% after a stellar US Nonfarm Payrolls report, which could refocus the Federal Reserve on battling higher inflation that has remained above target for five years. At the time of writing, the pair trades at 1.3205.
Strong payrolls and firmer yields keep Sterling on the back foot
The US Bureau of Labour Statistics (BLS) revealed that the economy created over 178K jobs in March, crushing forecasts of 60K. Despite the positive reading, February’s print was further downwardly revised to -133K, but on a positive note, the Unemployment Rate also fell to 4.3%, down from 4.4%. In the meantime, the US Dollar Index (DXY), which tracks the American currency's performance versus six peers, is up a minimal 0.12% and back above the 100.00 handle amid growing speculation that the Fed would maintain steady interest rates as the Middle East conflict prolongs.
Recently, the US S&P Global Services PMI contracted in March for the first time since January 23, falling from 51.7 in February to 49.8. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, wrote: “The PMI survey data show the US economy buckling under the strain of rising prices and intensifying uncertainty, as the war in the Middle East exacerbates existing concerns regarding other policy decisions in recent months, notably with respect to tariffs.”
Williamson commented that the stagflationary environment of no growth and surging prices is a challenge for policymakers, as the S&P survey revealed a slowdown in employment.
Data from the Chicago Board of Trade (CBOT) showed investors trimmed dovish bets and predicted the Fed would hold rates flat for the year. US Treasury yields, particularly the 2-year, edged higher following the NFP release.
GBP/USD price analysis: Technical outlook
In the daily chart, GBP/USD trades at 1.3205. The near-term bias is mildly bearish as spot holds below the clustered Simple Moving Averages (SMAs) surrounding 1.3550, confirming a loss of upside momentum after repeated failures along the descending resistance trendline that started at 1.3869. Price has also slipped away from the prior series of higher supported closes along the rising trendline from 1.3035, shifting the focus toward defending recent lows rather than extending gains. The FXS Fed Sentiment Index continues to grind higher, underscoring a firmer US Dollar backdrop that keeps rallies in GBP/USD vulnerable while the pair trades beneath the broken resistance zone.
Initial resistance emerges at the psychological 1.3300 region, where prior rebounds stalled ahead of the descending trendline, followed by 1.3400 and then the 1.3500 area aligning with the grouped moving averages that cap the upside. On the downside, immediate support is at 1.3200, just below the current price, with a break exposing 1.3100 and then the 1.3035 rising trendline origin. A daily close below this latter band would confirm a deeper bearish extension, while recovery above 1.3400 would ease the immediate downside pressure and open a broader retracement toward 1.3500.#GBPUSD #GBP $GBP