#GBPJPY @ 157.807 witnessed heavy selling on Thursday and retreats further from a three-week high. (Pivot Orderbook analysis)

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• GBP/JPY witnessed heavy selling on Thursday and retreats further from a three-week high.
• Recession fears boost demand for the safe-haven JPY and exert some downward pressure.
• The prospects for more BoE rate hikes underpin the GBP and should limit deeper losses.

The pair currently trades last at 157.807.

The previous day high was 161.54 while the previous day low was 157.35. The daily 38.2% Fib levels comes at 159.94, expected to provide resistance. Similarly, the daily 61.8% fib level is at 158.95, expected to provide resistance.

The GBP/JPY cross extends the previous day’s retracement slide from the 161.50 region, or a three-week high and remains under heavy selling pressure on Thursday. Spot prices snap a three-day winning streak and drop back closer to mid-157.00s, hitting a fresh daily low heading into the European session.

As investors digest the Bank of Japan’s (BoJ) dovish policy decision on Wednesday, looming recession risks boost demand for the safe-haven Japanese Yen and exert pressure on the GBP/JPY cross. Investors remain concerned about the potential headwinds stemming from the worst yet COVID-19 outbreak in China. Apart from this, the protracted Russia-Ukraine war has been fueling worries about a deeper global economic downturn.

The fears were fueled by Wednesday’s weaker US macro data, which showed that retail sales in December fell by the most in a year and manufacturing output recorded its biggest drop in nearly two years. This, in turn, forces investors to take refuge in traditional safe-haven assets and benefits the JPY. Apart from this, a modest pullback in the British Pound contributes to the heavily offered tone surrounding the GBP/JPY cross.

Despite the downfall, spot prices remain well above the weekly low amid expectations that the Bank of England will continue raising interest rates to combat stubbornly high inflation. The bets were lifted by the stronger wage growth data released on Tuesday, which is expected to keep inflation elevated. Furthermore, the headline UK CPI – though fell to a three-month low in December – is still running at levels last seen in the early 1980s.

In the absence of any relevant market-moving economic releases from the UK, the aforementioned mixed fundamental backdrop warrants some caution for aggressive bearish traders. Hence, it will be prudent to wait for strong follow-through selling before positioning for any further depreciating move for the GBP/JPY cross.

Technical Levels: Supports and Resistances

GBPJPY currently trading at 157.7 at the time of writing. Pair opened at 159.0 and is trading with a change of -0.82 % .

The pair remains strongly bearish on the daily time frame. It trades below the 20 SMA @ 159.18, 50 SMA 163.42, 100 SMA @ 164.06 and 200 SMA @ 163.56.

The previous day high was 161.54 while the previous day low was 157.35. The daily 38.2% Fib levels comes at 159.94, expected to provide resistance. Similarly, the daily 61.8% fib level is at 158.95, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 157.06, 155.12, 152.88
• Pivot resistance is noted at 161.24, 163.48, 165.42

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