UK:
- The BoE kept interest rates unchanged at the last meeting.
- The central bank is leaning more towards keeping interest rates “higher for longer” but it kept a door open for further tightening if inflationary pressures were to be more persistent.
- Key economic data like the latest employment report showed a very high wage growth despite the rising unemployment rate, but the latest UK CPI missed expectations across the board.
- The latest UK PMIs showed further contraction, especially in the Services sector.
- The market doesn’t expect the BoE to hike anymore.
Japan:
- The BoJ kept everything unchanged as expected.
- The Japanese CPI showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate missed expectations although it matched the previous reading.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI remains in expansion.
- BoJ governor Ueda repeated that they will not hesitate to take additional easing measures if needed and clarified that the recent comment on “quiet exit” from monetary easing was misinterpreted.
- The recent Japanese wage data showed a slowing in wage growth, and this is something the BoJ focuses on particularly.
- The Tokyo CPI, which is seen as a leading indicator for national CPI, continues to fall although it remains above the BoJ target.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the last leg higher in GBPJPY diverged strongly with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. The break of the trendline confirmed the reversal and the pair is now likely to fall into the 176.32 swing level. We can see that the sellers leant on the red 21 moving average recently to position for a drop into the swing level and yesterday we got a spike lower caused by the Japanese intervention as USDJPY rose above the key 150.00 level.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have clear zone where the price is likely to react to. The support around the 180.75 level now turned into a resistance and we might see a classic “break and retest” pattern as we have also the confluence with the 50% Fibonacci retracement level and the moving averages. This is where the sellers are likely to step in with a defined risk above the resistance to position for another drop into the 176.32 level. The buyers, on the other hand, will want to see the price breaking higher to pile in and target the next resistance around the 183.00 handle.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price bounced from the low around the 179.60 level and rallied into the key resistance zone. This is where we either get a rejection and new lows going forward or a break and a rally into the next resistance around the 183.00 handle.
Upcoming Events
Today on the agenda we have the ADP report and the ISM Services PMI. Tomorrow, we will see the latest Jobless Claims data, which continues to show a solid labour market. Finally on Friday, we will see the Japanese wage data, which is something that the BoJ focuses on particularly and later in the day the NFP report, which is the only one the Fed will see before its next rate decision. Strong US data is likely to keep global yields supported and weigh a bit on the JPY, while weak readings should help the JPY as the yield differentials would compress. Watch out for the Japanese wage data on Friday as that might be a market mover.
