The British Pound started the year with a mild bullish bias against the Japanese Yen, managing to hold positive ground despite the subdued New Year trading environment. However, upside momentum remains constrained, with the pair capped below the upper boundary of the past two weeks’ range around the 211.50–211.60 zone.
Overall market activity remains muted, as thin liquidity conditions continue to dominate with major Asian markets, including China and Japan, closed for New Year holidays.
The Japanese Yen remains under modest pressure, reflecting a relatively constructive market mood, although the lack of participation is keeping volatility compressed. Under these conditions, directional moves in GBP/JPY are likely to remain limited unless a clear technical breakout emerges.
From the UK macroeconomic perspective, attention is on the final S&P Global Manufacturing PMI. The data are expected to confirm an improvement in manufacturing activity to 51.2 in December from 50.2 in November. Still, unless the final figures diverge sharply from preliminary estimates, the impact on Sterling is likely to be short-lived.
Technical analysis: bearish divergence warns of near-term correction
GBP/JPY is trading near 211.17 after failing to sustain a move above the 211.50 area earlier in the session. The Relative Strength Index (RSI) is hovering around 57.5, pointing to a modest bullish bias. However, the presence of a bearish divergence between price action and momentum indicators raises the risk of a short-term pullback.
Immediate support is located between the former trendline resistance near 210.15 and the December 24 low at 210.05. A decisive break below this support zone would likely increase downside pressure toward the mid-December lows around 208.90.
On the upside, buyers need to clear the December 22 high at 211.59 to regain control and confirm a bullish continuation. If this barrier gives way, the focus would shift to the 127.2% Fibonacci extension of the December 15–22 rally at 212.75, followed by the 161.8% extension near 214.38, which stands as the next significant upside target.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
