GBP/JPY Tumbles After Over-Extension

The BOJ’s tweak to widen the long-term rates cap to 0.25% from the previous 0.2% came off as a rate hike in disguise, sending the yen higher across the board.

Technically speaking, the RSI’s bearish divergence was a warning on an overstretched rally. Zooming out on the daily chart an overbought RSI suggests a pullback towards the 20 or 30-day moving average (149.00).

On the hourly chart, successive breaks below 151.30 then 150.80 have confirmed the turnaround. 151.80 is the resistance after the first round of sell-off.

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