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- GBP/JPY gaps higher at market open
- Short-term outlook positive
- But gains ultimately capped towards 141.00
A strong start to the week for the Pound-to-Yen exchange rate is being tipped to lead to further gains in the short-term, according to new technical analysis.
Research from PIA First - a specialist technical analysis provider - shows the Pound is a buy against the Japanese Yen at the start of the new week.
"We look to Buy at 139.50," says a note from PIA First, noting the GBP/JPY to be "trading within the Wedge formation."
The timeframe being watched here is strictly short-term in nature, taking in coming hours and potentially the next few days.
The GBP/JPY exchange rate is currently trading at 140.43, but had fallen by close to a percent last week, leading to suggestions that the Pound was looking at a period of consolidation against its Japanese counterpart.
However, the Pound 'gapped' higher at the start of trade today, going from 139.37 at Friday's close to open the new week at 139.76:
"Positive overnight flows lead to an expectation of a firm open this morning," say PIA First. Such strong moves at the open suggest buying interest exists that can yield further gains, and the momentum has lasted through the day with foreign exchange traders buying Sterling against the Yen since the open.
"Further upside is expected and we look to set longs in early trade," said PIA First when they identified the latest price action.
But how much further can the Pound extend against the Yen?
We note that despite the strong short-term impetus, the exchange rate remains in consolidate mode, appearing to favour sideways trade between 138.90 at the bottom and 141.58 at the top.
We would therefore allow for the current impulse to rally towards 141.58, and await for signs a break of this ceiling has occurred before suggesting the Pound is due to run higher.
141.58 appears to be a solid level of support, and we would expect history to repeat and technical selling interest to pick up in the currency around this level. However, a break here could open the door to another impulse higher.
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