GBP

  • The BoE kept interest rates unchanged as expected at the last meeting.
  • The central bank is leaning towards keeping interest rates high 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 missed forecasts with wage growth coming in much lower than expected and job losses in November.
  • 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 Q2 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 latest 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 BoJ Governor Ueda last week delivered some interesting comments where it looked like the central bank was indeed considering rate hikes in 2024.
  • 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 tumbled for hundreds of pips after breaking below the key support at the trendline and the 50% Fibonacci retracement level. This huge move was an overreaction to BoJ’s Governor Ueda comments where he hinted to rate hikes coming in 2024. The price then pulled back from overstretched levels into the blue 8 moving average where we got a rejection. The next target for the sellers should be the 176.32 level.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see that the price keeps on getting rejected from the trendline as the sellers continue to step in with a defined risk above the trendline to position for new lows. The buyers will need the price to break above the trendline to start targeting new higher highs.

GBPJPY Technical Analysis – 1 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 1 hour

On the 1 hour chart, we can see that the price might now consolidate between the trendline and the recent low at 182.30. The playbook should be straightforward:

  • A breakout to the upside should see the buyers piling in for a rally into the previous support now turned resistance around the 185.00 handle.
  • A breakout to the downside should lead to more bearish bets and the sellers targeting new lows with the 176.32 level as the first target.

Upcoming Events

Today, we have the US PPI data followed by the FOMC rate decision where the Fed is expected to keep interest rates unchanged. Tomorrow, we have the BoE rate decision where the central bank is expected to keep rates unchanged and later in the day, we will see the latest US Retail Sales and Jobless Claims figures. On Friday, we conclude the week with the Japanese, UK and the US PMIs.