GBP/JPY clings to gains near multi-year tops, eyeing 155.00 mark
- A combination of factors assisted GBP/JPY to break out through a one-week-old trading range.
- Weaker Q1 Japanese GDP report, a positive risk tone dented demand for the safe-haven JPY.
- Upbeat UK employment details underpinned the sterling and remained supportive of the move.
The GBP/JPY cross maintained its bid tone through the early European session and was last seen hovering around the 154.70-75 region, just below multi-year tops set earlier this Tuesday.
The cross gained traction for the third consecutive session and climbed further beyond the 154.40-45 resistance zone, confirming a bullish breakout through a one-week-old trading range. This marked the third consecutive day of a positive move – also the fourth in the previous five – and was sponsored by a combination of factors.
The Japanese yen was weighed down by concerns that a fresh COVID-19 outbreak could hinder fragile economic recovery. This was reaffirmed by a downbeat Q1 GDP report, showing that the economy contracted 1.3% during the January-March period and 5.1% YoY. Apart from this, a positive risk tone further acted as a headwind for the safe-haven JPY.
Conversely, investors remained optimistic about the UK economic recovery from the pandemic amid the gradual easing of lockdown restrictions. This, in turn, continued underpinning the British pound, which got an additional boost following the release of better-than-expected UK monthly employment details for the month of March.
According to the Office for National Statistics (ONS), the UK's jobless rate edged lower to 4.8% during the three months to March. Adding to this, the claimant count change showed a surprise drop of 15.1K in April. This was accompanied by a downward revision of the previous month's reading to -19.4K from +10.1K reported previously.
From a technical perspective, Tuesday's positive move to the highest level since January 2018 has set the stage for an extension of the ongoing positive move. Hence, a subsequent strength beyond the key 155.00 psychological mark, towards testing the next major hurdle near the 155.55-60 region, now looks a distinct possibility.
Technical levels to watch