UK:
- The BoE hiked by 25 bps as expected at the last meeting.
- The central bank seems to be leaning more on the less hawkish side as a key line in the statement was tweaked to indicate the propensity for a “high for longer” stance rather than keeping with additional rate hikes.
- Key economic data like the latest employment report showed a very high wage growth despite the rising unemployment rate, and the UK CPI beat expectations the last time pointing to a stagflation.
- The UK PMIs recently missed expectations across the board with the Services sector plunging into contraction.
- The market expects the BoE to hike by 25 bps at the upcoming meeting.
Japan:
- The BoJ kept everything unchanged as expected at the last meeting but tweaked the YCC policy keeping the target band unchanged but giving more flexibility with a hard cap at 1.00%.
- The Japanese CPI data surprised to the upside recently with the core-core reading reaching again the previous high.
- The Unemployment Rate surprisingly jumped to 2.7% recently, although it remains near cycle lows.
- BoJ Governor Ueda over the weekend said that his focus is on a quiet exit from the monetary easing and added that the BoJ should have enough data by year end to decide how to proceed.
- The Japanese wage data last week showed a slowing in wage growth, and this is something the BoJ focuses on particularly.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the last leg higher in GBPJPY was diverging with the MACD, which is usually a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the key trendline around the 182.50 level where the buyers stepped in with a defined risk below the trendline to position for another rally into a new high. A break below the trendline would open the door for a selloff into the 176.32 swing low level.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had also the confluence with the 38.2% Fibonacci retracement level around the trendline, so the buyers had a very good support level there. The recent bounce is not yet indicative of a resumption of the uptrend as the price has not yet made a new higher high. The moving averages though have crossed to the upside again, so that might be an early sign of an incoming uptrend.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price was diverging with the MACD right when it fell into the trendline and the 38.2% Fibonacci retracement level. That was another confirmation for the buyers that a reversal might be in the cards. The price will need to break above the recent swing high around the 184.50 level to change the market structure into an uptrend and give the buyers back control. The sellers, on the other hand, will want to wait for the price to break through the major trendline to pile in and target the 176.32 level.
Upcoming Events
This week we have many important events. Today is the US CPI Day, which is expected to show an increase in headline inflation due to higher energy prices but further disinflation in the core measure. Tomorrow, we will see the latest US Jobless Claims, PPI and Retail Sales data. Finally on Friday, we get the University of Michigan Consumer Sentiment report. Strong data is likely to boost global yields and send the GBPJPY higher, while weak readings should have the opposite effect.