GBP/JPY Poised for Reversal Amidst Diverging Correlation with GBP/USD
GBP/JPY experienced a robust bullish rally in recent days, surging to the 193.5200 level after the FOMC announcement. However, signs suggest that the pair may be gearing up for a retracement. Interestingly, the correlation between GBP/USD and GBP/JPY appears to be diverging, particularly evident in the H4 timeframe where their movements are typically less correlated. While we anticipate a long setup in GBP/USD, our focus in GBP/JPY is on a potential reversal, possibly indicating a deep correction.
Looking ahead, investors will closely monitor the Bank of England (BoE) policy announcements and key US economic indicators, including the weekly Initial Jobless Claims and S&P Global's preliminary Manufacturing and Services PMI data for March. Concurrently, US stock index futures indicate gains ranging between 0.4% and 0.9%, suggesting a positive market sentiment. Absent any unfavorable data surprises, continued risk appetite in the market following the opening of Wall Street could exert additional downward pressure on the USD.
With these factors in mind, we are eyeing a reversal scenario in GBP/JPY, anticipating potential downside movement in the pair.