GBP
- The BoE kept interest rates unchanged as expected at the last meeting.
- The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
- BoE Governor Bailey repeated that they will keep rates high for long enough to get inflation back to target.
- The latest employment report beat expectations with wage growth remaining at elevated levels.
- The UK CPI missed expectations across the board, which is a welcome development for the BoE.
- The UK PMIs showed further contraction in the services sector, which accounts for 80% of UK’s economic activity.
- The UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
- The market doesn’t expect the BoE to hike anymore.
JPY
- The BoJ kept its monetary policy basically unchanged at the last meeting 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 Japanese CPIshowed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate 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 latest Japanese wage data beat expectations. As a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- 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 GBPJPY probed above the cycle high at 186.74 but rolled over soon after as disappointing US data led to a fall in global yields with the markets now pricing in rate cuts. We can see that the price recently bounced on the red 21 moving average and it’s now back around the 186.74 level. From a risk management perspective, the buyers will have a much better risk to reward setup around the major trendline, but a break above the 186.74 level could be enough to trigger another bullish wave.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the current price action with the price at the key 186.74 level where we can also find the confluence with the 61.8% Fibonacci retracement level of the recent fall. This is where the sellers are likely to pile in with a defined risk above the level to target a drop into the major trendline around the 184.00 level. The buyers, on the other hand, will want to see the price breaking above the 186.74 level with conviction to invalidate the bearish setup and increase the bullish bets into new highs.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. The start of the divergence is usually the target for a correction, so in this case it all falls perfectly into the 186.74 level. The buyers are likely to lean on the minor upward trendline to position for a continuation of the rally above the resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 184.00 level.
Upcoming Events
Today we will get the latest US Jobless Claims report which is probably going to be the most important release of the week. Tomorrow, the US will be on holiday for Thanksgiving Day and therefore the liquidity in the market will be thinner. On Friday, we conclude the week with the Japanese CPI data and the US PMIs. Weak US data should support the JPY as global yields are likely to fall further, while strong data is likely to weigh on the Yen in the short term.
