GBP

  • The BoE kept interest rates unchanged as expected at the last meeting.
  • The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
  • BoE Governor Bailey repeated that they will keep rates high for long enough to get inflation back to target.
  • The latest employment report beat expectations across the board with the unemployment rate ticking lower and wage growth ticking higher.
  • The UK CPI today missed expectations across the board which favours the BoE’s “on hold” stance.
  • The UK PMIs showed further contraction in the services sector, which accounts for 80% of UK’s economic activity.
  • The market doesn’t expect the BoE to hike anymore.

JPY

  • The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
  • Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
  • The recent Japanese CPI showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
  • The Unemployment Rate remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI matched the prior reading remaining in contraction with the Services PMI falling but holding on in expansion.
  • The latest Japanese wage data beat expectations. As a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
  • The market expects the BoJ to keep interest rates unchanged at the next meeting as well.

GBPJPY Technical Analysis – Daily Timeframe

GBPJPY Technical Analysis
GBPJPY Daily

On the daily chart, we can see that GBPJPY broke above the key resistance around the 183.70 level and continued higher targeting the high. The pair yesterday broke right through the high following the miss in the US CPI data which weakened the USD across the board and strengthened the other currencies.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see that from a risk management perspective the buyers will be better off waiting for a pullback into the trendline where they will also find the confluence with the broken high, the 38.2% Fibonacci retracement level and the red 21 moving average. This is where the buyers should step in with a defined risk below the trendline to position for another rally into new highs.

GBPJPY Technical Analysis – 1 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 1 hour

On the 1 hour chart, we can see more closely the bullish setup with the support zones marked with green boxes. Given that there’s also a good support around the 61.8% Fibonacci retracement level, the buyers might want to split their long position in half and place orders both at the 38.2% and the 61.8% Fibonacci retracement levels. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and position for a drop into the 183.50 level.

Upcoming Events

Today, we have the US Retail Sales and PPI data with the market likely giving more importance to the Retail Sales data. Tomorrow, we will see the latest US Jobless Claims figures where the market will want to see how fast the labour market is softening. Finally, on Friday we conclude with the UK Retail Sales figures.