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 giving the BoE a bit of relief.
- 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 at the last meeting.
- 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 Tokyo CPI, which is seen as a leading indicator for national CPI, continues to fall although it remains above the BoJ target.
- The Japanese wage data last week missed expectations which is unlikely to lead to a more hawkish BoJ since they want to see a higher wage growth.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the GBPJPY pair got close to the 176.32 level after the Japanese intervention but bounced back strongly as the market faded completely the downward spike. The price is now getting close to some key levels like the previous support turned resistance around the 183.00 handle and the downward trendline.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the resistance area around the 183.00 level where we can find the trendline, the previous support turned resistance and the 61.8% Fibonacci retracement level. This is where we can expect the sellers stepping in with a defined risk above the trendline to position for another drop into the 176.32 level. The buyers, on the other hand, will want to see the price breaking above the trendline to keep charging higher and target new highs.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we are starting to get a divergence with the MACD right into the trendline, which is usually a sign of weakening momentum often followed by pullbacks or reversals. This might be just another confirmation signal for the sellers that the price is likely to start to drop around these levels. From a risk management perspective, the buyers would be better off waiting for the price to come into the upward trendline to get back into the market with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking below the upward trendline to increase the bearish momentum into the 176.32 level.
Upcoming Events
This week the market is likely to focus on the US CPI report as that’s what might change the expectations around the next FOMC rate decision. Today, we will see the US PPI data and later in the day the FOMC Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at the same time we will also get the latest Jobless Claims figures. On Friday we conclude the week with the University of Michigan Consumer Sentiment report. The US data is important because weak readings might lower global yields and support the JPY, while strong figures should support global yields and weigh on the JPY. Moreover, the events in the Middle East could trigger some risk aversion and support the JPY if the war escalates and we see other Arab countries joining Hamas against Israel.
