GBP/JPY Price Analysis: Soars more than 300 pips, eyeing 168.00

• GBP/JPY advances sharply, more than 2.20%, hitting a fresh one-month high, though the rally stalled.
• The GBP/JPY is upward biased but might dip to 164.80, as the pair is overbought, as shown by the hourly chart RSI.

The GBP/JPY rallies sharply in the North American session as a risk-on impulse keeps US equities extending their gains after tumbling on a high US inflation report. Also, rumors of a possible U-turn on the UK’s tax-cut budget presented in September keep the British pound buoyant. At the time of writing, the GBP/JPY is trading at 166.56.

GBP/JPY Price Forecast

The GBP/JPY reached a new October high of 167.27 after the pair cleared the 100-day EMA of 163.17 while also clearing 165.71, last week’s high, exacerbating a rally above the 167.00 figure. Nevertheless, the uptrend lost steam as European traders got off their desks. Despite the sharp 300 pip rally, the Relative Strength Index (RSI) is in positive territory, suggesting buyers are getting a respite before challenging 167.94, September’s high.

The GBP/JPY one-hour chart shows the price is overextended, as the Relative Strength Index (RSI) is overbought. Therefore, the pullback from daily highs opens the door for an extended mean reversion move before resuming the uptrend.

Hence, the GBP/JPY first support would be the confluence of a 38.2% Fibonacci retracement and the R2 pivot around 165.38/61, followed by the 50% Fibonacci level at 164.79. A break below will expose the intersection of the 20-EMA and the R1 daily pivot around 164.21/31, from which the cross-currency could rally to challenge 167.94.

GBP/JPY Key Technical Levels