GBPJPY Fundamental Analysis
- 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.
- 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.
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.