UK:
- The BoE kept interest rates unchanged.
- The central bank is leaning more towards keeping interest rates “higher for longer” but it kept a door open for further tightening if inflationary pressures were to be more persistent.
- Key economic data like the latest employment report showed a very high wage growth despite the rising unemployment rate, but the latest UK CPI missed expectations across the board.
- The latest UK PMIs showed further contraction, especially in the Services sector.
- The market doesn’t expect the BoE to hike anymore.
Japan:
- The BoJ kept everything unchanged as expected.
- The Japanese CPI last week showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate surprisingly increased last month, although it remains near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI remains in expansion.
- BoJ governor Ueda repeated that they will not hesitate to take additional easing measures if needed and clarified that the recent comment on “quiet exit” from monetary easing was misinterpreted.
- The recent Japanese wage data 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 diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the price has eventually broken out of the key trendline and 38.2% Fibonacci retracement level and confirmed the reversal. The pair is now likely to fall into the swing low around the 176.32 level.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the break below the key trendline and the support around the 38.2% Fibonacci retracement level. If the price breaks below the recent low around the 180.70 level, the sellers are likely to pile in even more to extend the fall into new lows. From a risk management perspective, a better short opportunity would be around the downward trendline where there’s also the 38.2% Fibonacci retracement level for confluence.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline with the red 21 moving average for confluence where the sellers are likely to step in targeting a break below the low. If the price breaks above the trendline, the buyers should pile in to target a rally into the major trendline and eventually a breakout.
Upcoming Events
Tomorrow, we will have the US Jobless Claims data, which is very important for both the Fed and the market. Strong readings are likely to keep global yields high, while weak figures might cause them to drop and benefit the JPY. On Friday, we will get the latest US PCE data and a few Japanese economic releases such as the Tokyo CPI, the Unemployment Rate and Retail Sales. Strong Japanese data, especially the Tokyo CPI, might give the JPY a boost.
