The uptrend continues for the 11th month in a row. At the moment, we cannot see any perspectives for its change. Moreover, on the chart we can see the resistance line shifting upwards. The trend range is slowly expanding. The demand for safe assets is moderate, and since the signing of the trade deal with the EU, the pound has become one of the most attractive risk assets. The situation with the pandemic remains tense in the United Kingdom, but there is the most active process of vaccination of the population, which supports the demand for the pound, despite a series of negative macroeconomic reports.
As it became known this week, GDP in 2020 declined in Britain by 9.9%, which is a record drop in the entire history of observations. At the same time, it should be noted that in the fourth quarter there was a growth of 1%, while according to forecasts, the growth should have been twice less - no more than 0.5%. According to other reports, the dynamics of the economic recovery remain very weak - the trade deficit shrank in December by 6.7%, compared with the previous period, and the construction sector is still in decline.
The situation in Japan is no better. The economy is facing deflation, and a number of regions still have strict quarantine restrictions, which motivates the Bank of Japan to take more stimulus measures. At the same time, the demand for risky assets does not support the yen as a safe asset.
Next week will be even more volatile for the GBP/JPY since a lot of data on the Japanese economy is coming out: the GDP in the fourth quarter, industrial production output, and the latest consumer price index. Perhaps the pound will be under pressure during this period. However, we believe that the growth potential of the pound against the yen has not been exhausted, and the peak has not yet been reached. Therefore, our choice today is the deals to buy. Most technical analysis tools are also inclined towards the deals on the trend.
