In the early European session, the GBP/JPY cross reclaimed its daily high, with bulls now trying to push the momentum even higher above the round-figure milestone of 157.00.
Several supportive factors helped the Pound to recover positive momentum on Tuesday and expand on the overnight recovery from sub-156.00 levels, which marked a four-day low for the currency pair.
The British Pound remains supported by expectations that the Omicron epidemic will not disrupt the country’s economy and increased wagers on the Bank of England raising interest rates in the future.
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As part of the most recent coronavirus-related advancements, UK Prime Minister Boris Johnson stated on Monday that the government is considering the idea of shortening the quarantine duration from seven to only five days.
Johnson went on to say that they are making really good strides in the fight against Omicron, but that the amount of patients at the hospital is still growing.
This comes on the heels of the Bank of England’s unexpected interest rate increase in December. A further three to four rate rises are expected in 2022, according to the financial markets.
The development of new US Dollar dumping was also seen as a positive factor for the Pound, which resulted in a modest increase in the value of the GBP/JPY currency pair as a result.
However, signals of stability in the financial markets weighed on the safe-haven Japanese Yen, boosting the bid tone around the GBP/JPY exchange rate even more significantly.
It remains to be seen if bulls will be able to capitalize on the gain or whether they will be rejected around the 157.35-40 opposition zone in the absence of any market-moving economic announcements to guide the market.
GBP/USD CHART Source: Tradingview.com
Buyers successfully defended the 50-period simple moving average (SMA) on the four-hour graph for the third occasion since the start of the year, indicating that negative pressure might intensify if this level proves to be a resistance.
At least until that occurs, the short-term outlook is expected to stay positive. Furthermore, the pair is still trading within the upward regression range that has been in place since December.
On the upside, the first level of resistance is at 1.3635/40 (stationary level, middle line of the climbing channel), which coincides with the first resistance level on the downside.
If the duo manages to overcome that stumbling block, more improvements toward 1.3680 (the static level) might be noticed.
Support may be found at 1.3580 (bottom line of the channel), 1.3560 (static level), and 1.3540 (upper line of the channel) (50-period SMA).
The Relative Strength Index (RSI) signal on the very same chart is also reaching an overbought position, which might signal the start of a technical pullback before the pair can extend its advance any further.