GBP/JPY Price Analysis: Retraces from weekly highs, meandering around YTD highs

The GBP/JPY tumbled 0.17% on Tuesday due to waning GBP demand.
The cross-currency daily chart suggests the GBP/JPY might print a leg-down before resuming its uptrend.
Short term, the GBP/JPY is upward biased, and if it cleats 169.50, a test of 170.00 is on the cards.

The GBP/JPY surpasses the previous YTD high of around 168.73 but retraces from daily highs at about 169.80, below its opening price by a minimal 0.19%, despite a risk-on impulse. At the time of writing, the GBP/JPY is trading at 168.89.

Sentiment remains upbeat, with US equities registering gains between 0.90% – 1.14%, while the greenback registers slight losses of 0.03%, as shown by the US Dollar Index. In the FX space, the Japanese yen is the laggard, while the British pound is still appreciating after UK’s U-turn on Liz Truss’s minimal budget.

GBP/JPY Price Forecast

Given the backdrop, the GBP/JPY is gaining 1.63% so far in the week. The GBP/JPY daily chart portrays the pair as upward biased, but Tuesday’s price action formed a hanging-man candle pattern, meaning that additional downward pressure is expected. Therefore, GBP/JPY key support lies at 167.58, which, once cleared, could send the GBP/JPY sliding toward the October 17 daily low at 166.43.

The GBP/JPY hourly chart is also upward biased, though price action fluctuates above/below the 20-EMA with no clear trend. However, below the exchange rate, the rest of the EMAs suggest that the upside is warranted, but firstly it will need to clear some hurdles on its way north.

Hence the GBP/JPY first resistance would be the 169.00 figure, followed by the R1 pivot at 169.97, ahead of the 170.00 mark.