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 key economic data like 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 UK PMIs missed expectations across the board with the Services sector plunging into contraction.
- The market expects the BoE to hike by 25 bps in September.
Japan:
- The BoJ kept everything unchanged as expected at the last meeting but implicitly tweaked the YCC policy keeping the target band unchanged but giving more flexibility with a hard cap at 1.00%.
- This has created lots of volatility in the JPY, but eventually led to a fast depreciation.
- The Japanese CPI data surprised to the upside recently with the core-core reading reaching again the previous high.
- The Tokyo CPI, which is seen as a leading indicator for national cpi, missed expectations, but the core-core reading matched the prior figure remaining well above the BoJ’s inflation target.
- The Unemployment Rate surprisingly jumped to 2.7% although it remains near the lows.
- BoJ’s Governor Ueda at the Jackson Hole Symposium reaffirmed that inflation is still below target and that’s why they’re sticking with their monetary easing.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the last leg higher in the GBPJPY pair diverged with the MACD and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the price pulled back to the previous resistance now turned support in what could end up being a classic “break and retest” pattern as we have also the confluence with the red 21 moving average. If the price continues lower though, it will confirm the reversal and the next stop should be the major trendline.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have also the 50% Fibonacci retracement level at the trendline for further confluence and the recent price action after the bearish impulse looks like a bearish flag pattern. If the price breaks below the 184.00 support, we can expect the sellers to pile in and target the trendline. The buyers, on the other hand, will want to see the price to break above the most recent swing high to keep charging the 186.73 high and targeting a breakout.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a zone of interest for the market around the 184.75 level as the price reacted to this area multiple times. This zone should act as kind of a barometer for the sentiment. If the price stays above the level, we can expect more higher highs, but if it stays below the level, then we can expect the sellers to remain in control.
Upcoming Events
This week is an important one given that we will see many key labour market data for the US, including the NFP, before the next FOMC meeting. Weak data can send the market into risk off and support the JPY as a safe haven, on the other hand, strong data might make the market to expect more hawkish moves from the Fed and thus weigh on the JPY. Today, we have the US ADP report and after yesterday’s misses, a weak report is likely to increase recessionary fears. Moving on to tomorrow, we will see the US Jobless Claims and the US PCE data. Finally, we conclude the week with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all the options on the table, it’s also leaning more towards a pause in September, so we will need a very strong NFP to raise the chances of another hike at the upcoming meeting.
