GBP

  • The BoE left interest rates unchanged as expected at the last meeting removing the tightening bias but reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
  • The employment report beat expectations across the board with a positive revision to the December’s negative payroll figure.
  • The UK CPI missed expectations across the board but with Services inflation remaining sticky, which continues to support the BoE’s patient stance.
  • The latest UK PMIs improved from the prior month with the Services PMI beating expectations and the Manufacturing PMI missing.
  • The market expects the first rate cut in June.

JPY

  • The BoJ kept its monetary policy unchanged as expected at the last meeting with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
  • The Japanese CPI beat expectations although all measures eased further from the prior readings.
  • The latest Unemployment Rate remained unchanged hovering around cycle lows.
  • The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
  • The Japanese wage data missed expectations although there was a pick up from the prior reading.
  • The Tokyo CPI, which is seen as a leading indicator for National CPI, came in line with expectations.
  • The market expects the BoJ to hike rates in Q2.

GBPJPY Technical Analysis – Daily Timeframe

GBPJPY Technical Analysis
GBPJPY Daily

On the daily chart, we can see that GBPJPY recently couldn’t break above the high on the second try. We can also notice that the price has been diverging with the MACD for quite some time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the buyers leant on the red 21 moving average to keep pushing into the high targeting a breakout. The sellers, on the other hand, will need the price to break below the moving average to turn the trend around and start targeting the 185.21 level.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see that we have a strong support zone around the 190.35 level where we can also find the confluence with red 21 moving average and the 38.2% Fibonacci retracement level. This morning we got a spike to the downside caused by a report saying that some BoJ policymakers will likely say at the upcoming meeting that lifting negative interest rates will be reasonable. Nevertheless, this is where we can expect the buyers to step in with a defined risk below the level to position for a break above the cycle high with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower again to position for a drop into the 186.67 level.

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 around the 190.35 level. If the price breaks above the recent swing low at 190.67, then we can expect the buyers to increase the bullish bets as it would be a confirmation for further higher highs to follow.

Upcoming Events

Today we have the US ADP, the US Job Openings and the Fed Chair Powell speaking. Tomorrow, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US NFP report.