A Double Bottom Pattern Suggests a Potential Bullish Reversal

Economic

Forex

Summary:

The UK budget's announcements are poised to dictate the trajectory of the GBP. The GBPJPY has decisively breached its resistance level, confirming the formation of a bottom.

BUY GBPJPY

Close Time

CLOSED

194.142

Entry Price

200.500

189.300

211.066 +0.331 +0.16%

40.0

Pips

Profit

189.300

194.542

Exit Price

194.142

Entry Price

200.500

Fundamentals

The British pound's performance this week is more likely to be driven by the upcoming UK budget than the Bank of England's (BOE) policy decision on Thursday. Reports over the weekend indicated that the UK Chancellor, Reeves, might abandon plans to freeze disability benefits following strong opposition from Labour MPs.

If the UK's March 26th budget prompts the market to price in expectations of further interest rate cuts by the BOE, the pound could depreciate. Chancellor Reeves is expected to announce spending cuts, and a tighter fiscal policy could negatively impact the pound.

In Japan, recent outlooks on inflation and wage growth trends have triggered a rapid increase in Japanese long-term sovereign bond yields. The 10-year Japanese government bond yield has risen to 1.50%, the highest level since 2008.

Given the potential for escalating Japanese financing costs due to the rapid rise in the Japan's 10-year government bond yield, coupled with the increasing risk of a global economic slowdown stemming from Trump's aggressive trade tariff policies, market participants anticipate that the Bank of Japan (BOJ) will maintain its monetary policy stance on Wednesday, March 19th. They are awaiting the BOJ's updated guidance, with the consensus suggesting a potential rate hike in June or July.

According to Nikkei Chinese, as the fiscal year-end approaches, both Japanese and international financial institutions are revising their 2025 exchange rate forecasts. Regarding the yen's exchange rate, the prevailing view remains that the yen will continue to trade at historically depreciated levels. Among eight institutions, four project the exchange rate to be above 196 yen per British pound by the end of June. Many perspectives highlight factors related to supply and demand dynamics, including the BOJ's slow pace of interest rate hikes, which would otherwise support yen appreciation, and substantial foreign investment outflows.

A Double Bottom Pattern Suggests a Potential Bullish Reversal_1

Technical Analysis

The GBPJPY decisively breached the 193.09 resistance level on Monday, validating the recovery from 187.04 and confirming the formation of a double bottom pattern at 187.04 and 187.67.

Intraday bias is now tilted to the upside. A break above 194.73 would pave the way for a test of the 198.94 - 199.79 resistance zone.

On the downside, a break below 193.09 would initially shift the intraday bias to neutral, potentially leading to a prolonged consolidation phase. Overall, the corrective pattern from 208.09 is still in progress, with price action initiating the second phase from 180.00; the short-term breach of the 193.09 resistance will likely strengthen the bullish momentum.

Trading Recommendations

Trading Direction: Buy

Entry Price: 193.20

Target Price: 200.50

Stop Loss: 189.30

Valid Until: April 2, 2025 23:55:00

Support: 193.09, 191.76, 188.76

Resistance: 194.90, 195.97, 198.23

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