GBP/JPY Strengthens above 193.00, overbought RSI warrants caution for bulls
- GBP/JPY gains ground to near 193.25 in Friday’s early European session.
- The positive bias of the cross prevails above the 100-day EMA, but overbought RSI condition might cap its upside.
- The immediate resistance level emerges at 193.75; the first downside target to watch is 191.73.
The GBP/JPY cross drifts higher to near 193.25 during the early European session on Friday. The Japanese Yen (JPY) weakens against the Pound Sterling (GBP) as traders scale back their bets on further interest-rate hikes by the Bank of Japan (BoJ).
On Thursday, the BoJ kept short-term interest rates steady at 0.5% and slashed its forecasts for economic growth and inflation for the current year amid heightened trade uncertainty. Furthermore, the improved sentiment in the financial markets due to optimism about a de-escalation in the global trade conflict weighs on the safe-haven currency like the JPY and acts as a tailwind for GBP/JPY.
According to the 4-hour chart, the constructive outlook of GBP/JPY remains intact as the cross holds above the key 100-period Exponential Moving Averages (EMA). However, the Relative Strength Index (RSI) stands above the midline near 74.70, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term GBP/JPY appreciation.
The upper boundary of the Bollinger Band and the high of May 2 at 193.75 act as an immediate resistance level for the cross. A decisive break above this level could see a rally to 194.80, the high of March. Further north, the next hurdle to watch is 195.78, the high of April 3.
In the bearish case, the initial support level is located at 191.73, the high of April 25. Any follow-through selling below the mentioned level could expose the 190.00 psychological mark. Extended losses could see a drop to 189.43, the lower limit of the Bollinger Band.
GBP/JPY 4-hour chart
