The UK CPI missed expectations across the board and triggered a big repricing in interest rates expectations. In fact, the market was pricing a higher chance of a 50 bps hike prior to the report given the higher wages data in the previous UK employment report. Now, the market sees a higher chance that the BoE hikes by 25 bps today.
On the other hand, 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%. So, 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 as the market probably expected something more.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see the big downward spike caused by the Nikkei leak on the BoJ YCC tweak the day prior to the policy decision. We then saw a huge rally soon after as the BoJ indeed tweaked the YCC policy. This could have been a “sell the fact” move or the market expected something more. The pair maintains a bearish bias for now as the market is likely to expect more from the BoJ in the next months.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that after the huge rally into the previous resistance at 182.29, the price probed above it but eventually fell back lower. We should see more sellers piling in here targeting the support at 179.92 especially if today’s BoE policy decision results more skewed to the dovish side.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that a good resistance zone for the sellers would be the previous swing low level around 181.75 where we can also find the 38.2% Fibonacci retracement level. The buyers, on the other hand, will want to see the price breaking above the 182.29 resistance again to start piling in and target higher highs.
Upcoming Events
Today the market will be focused on the BoE policy decision and later the US Jobless Claims and ISM Services PMI data. Tomorrow, on the other hand, all eyes will be on the US NFP report. Strong data should raise global yields and lead to more JPY weakness, while weak readings should have the opposite effect and lead to more downside for GBPJPY. A dovish hike by the BoE should also result in a lower GBPJPY.
