London, January 19, 2024 – The GBP/JPY cross, which had been trading in positive territory for the fifth consecutive day, experienced a reversal during the early European session on Friday. Despite reaching an intraday high of 188.93, the cross relinquished its recent gains following the release of disappointing UK Retail Sales data. As of the latest update, the cross is hovering near 188.25, reflecting a marginal 0.04% gain for the day.
The National Statistics’ most recent report disclosed that UK Retail Sales contracted by 3.2% MoM in December, contrasting with a 1.4% increase in November and falling short of the market consensus, which had anticipated a 0.5% decline. Retail Sales, excluding fuel, mirrored this trend, registering a 3.3% MoM drop in December compared to the prior reading of a 1.5% upswing.
On an annual basis, UK Retail Sales in December posted a -2.4% YoY figure, significantly lower than the 0.2% recorded in the preceding month and falling below the market’s expectation of a 1.1% rise. The Pound Sterling responded to this downbeat data with a decline.
From a technical standpoint, the GBP/JPY maintains a positive outlook on the four-hour chart, with the cross holding above the 50- and 100-hour Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) remains in bullish territory above the 50 midline. However, an overbought RSI condition suggests the potential for further consolidation before any near-term appreciation in GBP/JPY.
The psychological round mark at 189.00 serves as an immediate resistance level for the cross, with potential follow-through buying opening the path to the upper boundary of the Bollinger Band at 189.36. Further upward challenges include a weekly high from December 2014 at 189.72, followed by the significant 190.00 round figure.
Conversely, an initial support level lies at the December 18 low of 187.32, with additional downside support at the 187.00 psychological mark and the 50-hour EMA at 185.93. A breach of this level may lead to a descent to the lower limit of the Bollinger Band at 184.85, with critical support materializing at the 100-hour EMA at 184.65, potentially signaling a resumption of the downtrend.