UK:
- The BoE hiked by 25 bps as expected.
- The central bank seems to be leaning more on the less hawkish side as a key line in the statement was tweaked to indicate the propensity for a “higher for longer” stance rather than keeping with additional rate hikes.
- Recent economic data is not supporting the BoE stance as the latest employment report showed even more wage growth despite the unemployment rate ticking higher again, and the UK CPI beat expectations pointing to stagflation.
- The BoE is expected to hike by another 25 bps in September.
Japan:
- The BoJ kept everything unchanged as expected but implicitly tweaked the YCC policy keeping the target band unchanged but giving more flexibility with a hard cap at 1.00%.
- They basically widened the YCC band without stating it explicitly.
- This has created lots of volatility in the JPY, but eventually led to a fast depreciation.
- The BoJ has also already intervened twice to smooth the rise in yields ultimately weighing on the JPY.
- Last week, the Japanese CPI data surprised to the upside with the core-core reading reaching again the previous high.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPJPY recently broke above the 184.00 high and extended the rally towards the 186.50 level. The price action has been rangebound since the last week as the market is probably awaiting a catalyst for the next major move. We can also notice that the price is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. So, if we see the price falling back below the 184.00 handle, we can expect a move lower into the trendline at very least.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have good support area around the 184.00 handle where we can also find the 38.2% Fibonacci retracement level. This is where we can expect the buyers to pile in with a defined risk below the level to target a new high. The sellers, on the other hand, will want to see the price breaking lower to pile in and extend the fall into the trendline.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor swing support level at 185.46 where the price has recently bounced from. A break below that level would see more sellers coming into the market and push the price into the 184.00 support. On the upside, a break above the 185.60 swing level should see more buyers piling in to extend the rally into the 186.75 high.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the UK PMIs today and the US Jobless Claims tomorrow. If the UK PMIs surprise to the downside, we can expect the GBPJPY to depreciate and vice versa if the PMIs surprise to the upside. Strong US Jobless Claims might push global yields higher and take the GBPJPY with it. On the other hand, very weak data can cause recessionary fears and lead to risk off across the board which would give the JPY a tailwind. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.
