Currency Twists: GBP/JPY Faces Pressures Amid Manufacturing Decline

The GBP/JPY currency pair sharply declined due to the weakness of the Pound sterling, reaching a low at 194.19 and currently trading around 194.90. Traders are eyeing a Potential Reversal Zone (PRZ) set at 200.20, indicating a possible price reversal around that level.

Manufacturing PMI Impact

In December 2024, the UK Manufacturing PMI fell to 47.0, highlighting a significant decline in manufacturing activity. This decrease stems from reduced production and a sharp decline in new orders, largely influenced by weaker European demand. Export sales saw their fastest drop since October 2023, while purchasing prices sharply increased. Employment also fell for the second consecutive month, reflecting ongoing struggles within the sector. Manufacturers are feeling extremely pessimistic, marking the lowest sentiment in two years due to weak demand and economic pressures.

Technical Outlook for GBP/JPY

GBP/JPY is trading below both short-term and long-term moving averages on the 4-hour chart, suggesting an overall downward trend. Immediate resistance is at 195.35; a break above this level could lead to targets around 196, 198, 199, or even 200.20. On the downside, support is encountered at 196.30, with additional levels at 195.70, 195, 194.10, and 193.

Trading Strategy Recommendations

The CCI (50) and Directional Movement Index are both bearish. With the current indicators, a strategy to consider is selling on rallies around the 195.48-50 mark, with a stop-loss set at approximately 196.58 and a take-profit target at 190.