GBPJPY Technical Analysis

GBP

• The BoE left interest rates unchanged as expected at the last meeting
  removing the tightening bias but reaffirming that they will keep rates high for
  sufficiently long to return to the 2% target.
• The employment report missed expectations with an uptick
  in the unemployment rate and an easing in wage growth.
• The UK CPI missed expectations across the board but with
  Services inflation remaining sticky, which continues to support the BoE’s
  patient stance.
• The latest UK PMIs improved from the prior month with the
  Services PMI beating expectations and the Manufacturing PMI missing.
• The market expects the first rate
  cut in August.

JPY

• The BoJ finally exited the negative interest rates
  policy as expected
  raising interest rates by 10 bps bringing the rate to a target between
  0.00-0.10%. Moreover, the central bank scrapped the yield curve control and the
  ETF purchases, while maintaining QE in place as expected.
• BoJ Governor Ueda said that they are at a phase where
  they can slowly proceed with possible rate hikes. So, the data will be
  important in the next months for further actions.
• The latest Unemployment Rate remained unchanged hovering around
  cycle lows.
• The Japanese PMIs improved for both the Manufacturing
  and Services measures although the former remains in contractionary territory.
• The Japanese wage data beat expectations by a big margin
  which then led to the rate hike from the BoJ.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, recently came in line with expectations with the
  measures increasing from the prior report.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY extended
into a new cycle high and it’s now near the upper bound of the rising channel.
Moreover, we can notice that the price continues to diverge with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, it might be a signal for a pullback into the lower
bound of the channel, but we will need a catalyst to kick off such a big
correction.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that from a risk
management perspective, the buyers will have a much better risk to reward setup
around the previous resistance now turned support at the
191.25 level where we can also find the 38.2% Fibonacci retracement level
for confluence. The
sellers, on the other hand, will want to see the price breaking lower to
invalidate the bullish setup and increase the bearish bets into the lower bound
of the channel.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more closely
the recent price action with the price now at the recent swing high level where
we can also find the red 21 moving average for
confluence. This is where we can expect the buyers to step in with a defined
risk below the level to position for a rally into the upper bound of the
channel. The sellers, on the other hand, will want to see the price breaking
lower to position for a drop into the support zone.

Upcoming Events

Today we have the FOMC rate decision on the agenda
where the central bank is expected to keep rates unchanged. Tomorrow, we have
the BoE rate decision where the central bank is expected to keep rates
unchanged. Moreover, we get the US Jobless Claims figures and the latest UK and
US PMIs. Finally, on Friday, we conclude the week with the Japanese CPI and the
UK Retail Sales data.

This article was written by FL Contributors at www.forexlive.com.