The GBP/JPY currency pair has extended its robust intraday recovery and is climbing to a two-week high above mid-210.00 levels in the early European trading session on Friday. Spot rates appear set to record gains for the first time in almost three weeks. The Japanese yen depreciated against most major counterparts after news that the nation's National Consumer Price Index (CPI) remained flat in August and core inflation stayed well below the Bank of Japan's (BoJ) 2% annual target. JPY weakness was further accentuated by the central bank's surprise decision to hike interest rates to a 31-year high. Meanwhile, the British pound was boosted by prospects of a possible interest rate hike by the Bank of England (BoE).
Technically, the current spot price appears to have gained some recognition beyond the 23.6% Fibonacci Retracement level following the August-September drop. In addition to that, the Relative Strength Index (RSI) of 66.53 teeters close to being in overbought territory on the 4-hour time frame. Additionally, the MACD indicator signals bullish momentum, with the line above the signal and in positive territory. A further rally will likely meet quick resistance near the 100 EMA on the 4-hour chart at 210.71. Resistance continues after that in the form of clusters of Fibonacci levels, beginning with the 38.2% retracement at 211.06, leaving the short-term outlook bounded and leaning bearish despite the recent gains. Nonetheless, upside continuation past this level will open a path to the 50.0% retracement at 212.29, followed by higher ones at 213.51, 215.26, and 217.48. For the downside view, the 23.6% Fibo. retracement at 209.54 marks the first one, followed by a deeper one at 207.09. Any further drop below that will make room for a corrective fall.
