GBPJPY Technical Analysis | Forexlive

The BoE surprised at the last meeting delivering a
50 bps rate hike instead of the 25 bps expected. This move was justified by the
higher-than-expected inflation figures the previous day and the really hot
employment report prior to that. BoE’s Governor Bailey has also reiterated
recently at the ECB forum that they will do what is necessary to bring
inflation back to target and that they will remain data dependent.

On the other hand, the BoJ remains stuck with its
dovish monetary policy even if Japan’s core inflation keeps climbing to new
highs. There are tentative signs of a possible exit from this policy though as
we saw in the latest BoJ’s Summary of Opinions where members didn’t expect
inflation to return back to 2% as they previously mentioned, and a member
called for a revision of the YCC policy.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY had an
incredible rally since the last employment report back in the middle of June.
The trend is undoubtedly bullish with moving averages crossed
to the upside and the price making higher highs and higher lows. We can notice
though that the upside momentum if waning as the rally slowed considerably and
the price didn’t react much both to the hot UK CPI data and the surprising
BoE’s rate hike. These are generally signs of a top.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that GBPJPY is
forming a rising wedge pattern
and we have also the divergence with the
MACD as a
confirmation given that these patterns are divergent in nature. The price may
still make a new higher high, but we are likely to see a break to the downside
soon and a fall into the major trendline where we
can find the base of the wedge and the 38.2% Fibonacci retracement level
for confluence. That’s
where we should see strong buyers stepping in to target new highs, while the
sellers will want to see a break lower to target new lows.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is now trying to break above the 183.80 resistance zone.
The multiple rejections formed an ascending triangle
pattern and this opens up two possible scenarios:

• A break to the upside should lead to a
  rally towards the upper bound of the wedge, somewhere near the 185.00 level.
• A break to the downside should lead to a
  deeper pullback into the 180.00 level.

See also the video below: