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.
- The BoE members continue to repeat 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 was a welcome development for the BoE.
- The UK PMIs last week beat expectations on both the Manufacturing and Services measures, with the Services sector crawling back in expansion.
- The latest 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 CPIlast week showed that inflation pressures are easing although they remain well above the BoJ’s 2% target.
- The latest Unemployment Rate remained unchanged near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction, but the Services PMI ticked higher remaining 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 managed to reach a new high recently but started to erase some gains in the first part of the week. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where they will also find the 50% Fibonacci retracement level for confluence.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be an extra signal for a deeper pullback into the trendline. Furthermore, the short-term trend switched to the downside with the price printing lower lows and lower highs with the moving averages being crossed to the downside.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action where we have a textbook bearish setup. In fact, the sellers piled in on the resistance zone around the 187.20 level where we can also find the confluence with the red 21 moving average, the 50% Fibonacci retracement level and the trendline. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for new highs.
Upcoming Events
Tomorrow we will get the US PCE and US Jobless Claims data with the market likely focusing more on the latter given that we already saw the latest inflation data with the US CPI report just two weeks ago. On Friday, we conclude the week with the Japan Labour Market data and the US ISM Manufacturing PMI which missed expectations by a big margin the last time. Weaker US data is likely to strengthen the JPY as global yields should fall further. Conversely, strong figures are likely to weigh on the Yen in the short-term.
