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.
  • The BoE members continue to repeat that they will keep rates high for long enough to get inflation back to target.
  • The latest employment report beat expectations with wage growth remaining at elevated levels.
  • The recent UK CPI missed expectations across the board, which was a welcome development for the BoE.
  • The UK PMIs beat expectations on both the Manufacturing and Services measures, with the Services sector crawling back in expansion.
  • The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
  • The market expects the BoE to start cutting rates in Q3 2024

JPY

  • The BoJ kept its monetary policy basically unchanged at the last meeting 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 Japanese CPIshowed that inflation pressures are easing although they remain well above the BoJ’s 2% target.
  • The latest Unemployment Rate remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI fell further into contraction, but the Services PMI ticked higher remaining in expansion.
  • The latest Japanese wage data beat expectations and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
  • The market expects the BoJ to hike rates in Q2 2024.

GBPJPY Technical Analysis – Daily Timeframe

GBPJPY Technical Analysis
GBPJPY Daily

On the daily chart, we can see that GBPJPY is now near the key trendline where we have also the confluence with the 50% Fibonacci retracement level. This is where the buyers should step in with a defined risk below the trendline to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 178.00 handle.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see more closely the bearish setup around the trendline and the Fibonacci level. If we do get a bounce on the trendline, the buyers will then need to break above the counter-trendline and the 186.30 resistance to confirm a rally into new highs. The sellers, on the other hand, will lean on the counter-trendline to try again a break below the major trendline.

GBPJPY Technical Analysis – 1 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 1 hour

On the 1 hour chart, we can see that the price is starting to diverge with the MACD right near the key trendline. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the sellers will need a break below the trendline to confirm the reversal and invalidate the bullish setup, while the buyers will need a break above the counter-trendline to confirm the reversal and increase the bullish bets into new highs.

Upcoming Events

Today we have another US labour market report with the release of the US ADP data. Tomorrow, it will be the time for the US Jobless Claims figures, while on Friday we conclude the week with the NFP report. Weak US data is likely to weigh on global yields and favour the JPY, while strong figures might keep the pair supported.