GBP

  • The BoE left interest rates unchanged as expected but with Haskel and Mann this time voting for a hold instead of a hike.
  • The employment report missed expectations with a big jump in the unemployment rate although the wage growth increased.
  • The UK CPI beat expectations with Services inflation remaining sticky, which continues to support the BoE’s patient stance.
  • The latest UK PMIs showed the Services PMI missing expectations slightly and the Manufacturing PMI beating.
  • The market expects the first rate cut in August.

JPY

  • The BoJ finally exited the negative interest rates policy as expected at the last meeting 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.
  • The latest Unemployment Rate missed expectations although it continues to hover around cycle lows.
  • The Japanese PMIs improved further for both the Manufacturing and Services measures although the former remains in contractionary territory.
  • The latest Japanese wage data came in line with expectations.
  • The Tokyo CPI, which is seen as a leading indicator for National CPI, came in line with expectations.
  • The market expects another rate hike from the BoJ this year although the timing remains uncertain.

GBPJPY Technical Analysis – Daily Timeframe

GBPJPY Technical Analysis
GBPJPY Daily

On the daily chart, we can see that GBPJPY bounced on the 61.8% Fibonacci retracement level around the lower bound of the rising channel and extended the rally into the 193.00 handle. The buyers are targeting the upper bound of the channel around the 195.00 handle, but they will need to break the cycle high first to extend the rally further. The sellers, on the other hand, might want to step in around the cycle high with a defined risk above it to position for a drop back into the lower bound of the channel targeting a break below it.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see the price is now at a key resistance zone around the 192.85 level where the pair got rejected from several times. The UK data has been pretty strong and continues to point to higher rates for longer for the BoE, so the buyers have the fundamentals on their side to try a breakout. The sellers, on the other hand, will likely step in again at this resistance to position for a drop back 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 pair printing higher lows recently which points to bullish momentum. If the breakout were to fail and the price were to fall below the black trendline, the sellers will regain control and push the price back into the lower bound of the channel as the buyers will likely fold at that point.

Upcoming Events

Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Japanese CPI and the UK Retail Sales.