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Tactical Positioning for Oversold Rebound as Pessimism Exhausted
Forex
Summary:
GBP/JPY currently finds itself at a dynamic equilibrium where excessive panic selling of the pound meets persistent weakness in JPY policy shifts. Short-term bearish catalysts have been fully released, resonating with technically oversold conditions, creating an event-driven tactical window for long positions.
Buy
TradingGBPJPY
EXP
196.578
Entry Price
201.500
TP
195.200
SL
197.872 +2.213 +1.13%
0
Point
Flat
195.200
SL
CLOSING
196.578
Entry Price
201.500
TP
Fundamentals
The GBP faced systemic selling pressure yesterday, primarily driven by a market confidence crisis triggered by the UK's new fiscal policies. Chancellor Rachel Reeves' welfare reform bill raised concerns over fiscal discipline abandonment, causing the 10-year UK gilt yield to surge nearly 4% to 4.61% – its sharpest single-day growth in years. Though yield spikes typically support currencies, this instead amplified fears about Britain's widening deficit, sparking broad GBP selling. Prime Minister Starmer publicly backed Reeves, but political uncertainty continues to hinder confidence recovery.
Regarding the monetary policy, BoE committee member Taylor signaled potential "five interest rate cuts this year," suggesting the benchmark rate could drop to 2.75%-3.00%, significantly below current levels. This expectation is already priced in. Should today's US NFP data underperform, the US dollar's weakness may indirectly catalyze a GBP rebound, realizing the pessimism-exhausted effect.
While the JPY initially found support from BoJ member Hajime Takata’s rate-hike hints, newly appointed policymaker Kazuyuki Masu emphasized " the BOJ shouldn't be in a rush to raise rates," delaying policy normalization. Simultaneously, Trump's threat to impose 30%-35% tariffs on Japanese cars suppressed the safe-haven demand for JPY. Improving global risk appetite (e.g., sustained US equity rallies) further eroded JPY's appeal, indirectly aiding GBP/JPY bulls.
Technical Analysis
The daily chart shows GBP/JPY printing successively higher highs and lows, confirming a clear uptrend. Moving averages exhibit a bullish alignment, reinforcing trend sustainability.
On the 4-hour chart, yesterday's plunge pushed RSI into oversold territory, amplifying short-term technical rebound requirements.
Current price action indicates GBP/JPY's retreat tested but respected the rising trendline during European trading hours today. The subsequent recovery confirms effective trendline support, signaling exhaustion of bearish momentum and continuation of the uptrend.
Upside targets include testing the 199.70 resistance initially, potentially reaching the psychological 200.00 level. A sustained break above 200.00 could extend gains toward 202.00.
Trading Recommendations
Trading direction: Buy
Entry price: 196.50
Target price: 201.50
Stop loss: 195.20
Valid Until: July 17, 2025, 23:00:00
Support: 195.35/194.01
Resistance: 199.70/200.00
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