GBPJPY Technical Analysis | Forexlive

GBP

• The BoE kept interest rates
  unchanged as expected at the last meeting.
• The central bank is leaning towards
  keeping interest rates “higher for longer”, although it keeps a door open for
  further tightening if inflationary pressures were to be more persistent.
• The BoE members continue to repeat
  that they will keep rates high for long enough to get inflation back to target.
• The latest employment report beat
  expectations with wage growth remaining at elevated levels.
• The UK CPI missed expectations
  across the board, which was a welcome development for the BoE.
• The UK PMIs last week beat
  expectations on both the Manufacturing and Services measures, with the Services
  sector crawling back in expansion.
• The latest UK Retail Sales missed
  expectations across the board by a big margin as consumer spending remains
  weak.
• The market doesn’t expect the BoE to
  hike anymore.

JPY

• The BoJ kept its monetary policy basically
  unchanged at the last meeting 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 Japanese CPIlast week showed that inflation pressures are easing
  although they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate
  remained unchanged near cycle lows.
• The Japanese Manufacturing PMI fell
  further into contraction, but the Services PMI ticked higher remaining in
  expansion.
• The latest Japanese wage data beat
  expectations. As a reminder the BoJ is focusing on wage growth to decide
  whether to tweak its monetary policy.
• 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 GBPJPY managed
to reach a new high recently but started to erase some gains in the first part
of the week. From a risk management perspective, the buyers will have a much
better risk to reward setup around the trendline where they will also find the
50% Fibonacci retracement level for confluence.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
higher diverged with the MACD which is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, it might be an extra
signal for a deeper pullback into the trendline. Furthermore, the short-term trend
switched to the downside with the price printing lower lows and lower highs
with the moving averages being crossed to the downside.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action where we have a textbook bearish setup. In
fact, the sellers piled in on the resistance zone around the 187.20 level where
we can also find the confluence with the red 21 moving average, the 50%
Fibonacci retracement level and the trendline. The buyers, on the other hand,
will want to see the price breaking higher to invalidate the bearish setup and
position for new highs.

Upcoming Events

Tomorrow we will get the US
PCE and US Jobless Claims data with the market likely focusing more on the
latter given that we already saw the latest inflation data with the US CPI
report just two weeks ago. On Friday, we conclude the week with the Japan
Labour Market data and the US ISM Manufacturing PMI which missed expectations
by a big margin the last time. Weaker US data is likely to strengthen the JPY
as global yields should fall further. Conversely, strong figures are likely to
weigh on the Yen in the short-term.