GBPJPY Technical Analysis | Forexlive

The BoE surprised at the last meeting with a 50 bps
rate hike instead of the 25 bps expected as the hot employment report and the
higher inflation data forced the central bank to choose the more aggressive
option. Since then, we got another employment report but this
time it missed expectations on the jobs side but beat again on the wages side
which points to a wage price spiral in action. In fact, the market is pricing
in a higher chance of a 50 bps hike at the next meeting, although the UK CPI
report today will probably decide if it’s going to be 25 bps or 50 bps.

On the other hand, the BoJ
maintains its dovish stance while core inflation in Japan keeps on rising.
There are small signs of a possible exit from the current policy though despite
the BoJ board members keep on dismissing any change at the upcoming meeting.
Nevertheless, the market still sees the risk of a surprising change to the YCC
policy.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the GBPJPY
eventually pulled back into the trendline where it
bounced from the 179.92 support and the
38.2% Fibonacci retracement level.
This pullback though, made the moving averages to cross
to the downside and give the pair a bearish bias. A miss in the UK CPI report
should trigger a bigger selloff, while a beat should invalidate the bearish
setup.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price was
trading within a rising wedge pattern and
there was a divergence with the
MACD. This is
generally a strong signal that a pullback is due, and the usual target is the
base of the wedge, which in this case was the 179.92 level. In fact, the price
pulled back almost perfectly into that level and eventually bounced.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the price
is struggling to break above the 182.00 handle, so we have a key resistance
level to watch. The buyers will need the price to break above the resistance
with conviction to pile in and target the highs neat the 185.00 handle. The
sellers, on the other hand, are likely to lean on the resistance with a defined
risk above it to target new lows. Watch out for the UK CPI report as it will likely decide where the price will go next.