GBPJPY Technical Analysis | Forexlive

GBPJPY Fundamental Analysis

UK

• The BoE kept interest rates unchanged at the last meeting.
• The central bank is leaning towards
  keeping interest rates “higher for longer”, although it kept a door open for
  further tightening if inflationary pressures were to be more persistent.
• The latest employment report showed a slowdown in wage growth
  and some job losses in September which could point to a softening labour
  market.
• The recent UK CPI slightly beat expectations but given the
  softening in the labour market it’s unlikely to change the BoE’s stance.
• The UK PMIs showed further contraction in the services
  sector, which accounts for 80% of UK’s economic activity.
• The market doesn’t expect the BoE to
  hike anymore.

Japan

• The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1%
  on the 10-year JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again that they won’t
  hesitate to take easing measures if needed and that they are not foreseeing
  sustainable price increases.
• The recent Japanese CPIshowed that inflationary pressures
  remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate last month
  remained unchanged near cycle lows.
• The Japanese Manufacturing PMI matched the prior reading remaining
  in contraction with the Services PMI falling but holding on in expansion.
• The BoJ officials continue to repeat
  that the central bank should keep the current monetary policy.
• The latest Japanese wage data missed expectations again which is
  unlikely to lead to a more hawkish BoJ in the near future.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, beat expectations last week.
• The market expects the BoJ to keep
  interest rates unchanged at the next meeting as well.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the GBPJPY pair
has been consolidating for a month below the 183.50 resistance. The
price yesterday surged into the resistance zone as the BoJ disappointed. The
buyers will now try to break out and target the cycle high around the 186.74
level. The sellers, on the other hand, are likely to step in here with a
defined risk above the resistance to position for another drop into the lows.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
support at 181.00 and the resistance around the 183.50 level. The first try out
of the range failed, but the buyers are coming back again. After such a strong
and quick rally there’s also a risk that we see a fakeout as the momentum might
weaken right after the breakout, so the buyers will need to be careful.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action around the resistance zone. If the price stays
above the resistance, the bias will remain bullish, and we can expect the
buyers to pile in to target the cycle high. The sellers, on the other hand,
will want to see the price falling back below the resistance and break the
recent swing low around the 183.14 level to confirm a fakeout and position for
a drop into the 181.00 support.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today we will get the US
ADP, the ISM Manufacturing PMI, the Job Openings data and the FOMC rate
decision. Tomorrow, we will have the BoE rate decision and the US Jobless
Claims data, while on Friday we conclude the week with the US NFP report and
the ISM Services PMI. Weak US data is likely to lead to a fall in global yields
which should favour the JPY. Conversely, strong data should support global
yields and weigh on the JPY, especially after the recent BoJ disappointment.