Forex Watchlist: Can GBP/JPY Extend Its Uptrend?

GBP/JPY looks set to bounce from a trend line support.

Can GBP make new 2022 highs against JPY?

Here’s the daily chart I’m looking at:

GBP/JPY Daily Forex Chart

In case you missed it, GBP has taken a beating against JPY as traders worried about high interest rates and high inflation triggering recessions in the major.

GBP was dragged even lower yesterday after TWO of PM Boris Johnson’s Cabinet members quit their posts due to a loss of confidence in their chief.

Health Secretary Sajid Javid said that:

“We may not have always been popular, but we have been competent in acting in the national interest. Sadly, in the current circumstances, the public are concluding that we are now neither.”

Meanwhile, Finance Minister Rishi Sunak tweeted:

“The public rightly expect government to be conducted properly, competently and seriously. I recognise this may be my last ministerial job, but I believe these standards are worth fighting for and that is why I am resigning.”

No “keep calm and carry on” for these two, eh?

Luckily for the pound, PM Johnson quickly placed his Chief of Staff Steve Barclay as new Health Secretary while Education Secretary Nadhim Zahawi replaced Sunak as Treasury chief.

The stability from the new appointments helped stem GBP’s losses across the board.

Does this mean that GBP/JPY can now extend its uptrend?

The pair is retesting a trend line support that’s near the daily chart’s 100 SMA. Not only that but GBP/JPY’s current prices also line up with the 61.8% Fibonacci retracement of June and July’s downswing!

Talks of softer stances on Brexit and taxes can probably prop GBP up, especially if markets focus on risk-taking in the next few days.

GBP/JPY could jump from its trend line support and revisit previous inflection points like 166.00 or even the 168.00 previous highs.

Uncertainty around the UK’s leadership, on the other hand, could drag GBP lower against safe havens like JPY.

Watch for a break and then consistent trading below the trend line and the 100 SMA, which could lead to a trip to the 160.00 and 158.00 previous support zones.

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