GBP

  • The BoE left interest rates unchanged as expected at the last meeting removing the tightening bias but reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
  • The employment report missed expectations with an uptick in the unemployment rate and an easing in wage growth.
  • The UK CPI missed expectations across the board but with Services inflation remaining sticky, which continues to support the BoE’s patient stance.
  • The latest UK PMIs improved from the prior month with the Services PMI beating expectations and the Manufacturing PMI missing.
  • The market expects the first rate cut in August.

JPY

  • The BoJ finally exited the negative interest rates policy as expected raising interest rates by 10 bps bringing the rate to a target between 0.00-0.10%. Moreover, the central bank scrapped the yield curve control and the ETF purchases, while maintaining QE in place as expected.
  • BoJ Governor Ueda said that they are at a phase where they can slowly proceed with possible rate hikes. So, the data will be important in the next months for further actions.
  • The latest Unemployment Rate remained unchanged hovering around cycle lows.
  • The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
  • The Japanese wage data beat expectations by a big margin which then led to the rate hike from the BoJ.
  • The Tokyo CPI, which is seen as a leading indicator for National CPI, recently came in line with expectations with the measures increasing from the prior report.

GBPJPY Technical Analysis – Daily Timeframe

GBPJPY Technical Analysis
GBPJPY Daily

On the daily chart, we can see that GBPJPY extended into a new cycle high and it’s now near the upper bound of the rising channel. Moreover, we can notice that the price continues to diverge with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback into the lower bound of the channel, but we will need a catalyst to kick off such a big correction.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the previous resistance now turned support at the 191.25 level where we can also find the 38.2% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and increase the bearish bets into the lower bound of the channel.

GBPJPY Technical Analysis – 1 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 1 hour

On the 1 hour chart, we can see more closely the recent price action with the price now at the recent swing high level where we can also find the red 21 moving average for confluence. This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into the upper bound of the channel. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the support zone.

Upcoming Events

Today we have the FOMC rate decision on the agenda where the central bank is expected to keep rates unchanged. Tomorrow, we have the BoE rate decision where the central bank is expected to keep rates unchanged. Moreover, we get the US Jobless Claims figures and the latest UK and US PMIs. Finally, on Friday, we conclude the week with the Japanese CPI and the UK Retail Sales data.