GBPJPY Technical Analysis – The bias is starting to turn more bearish


  • The BoE hiked by 25 bps as expected.
  • The central bank seems to be leaning
    more on the less hawkish side as a key line in the statement was tweaked to
    indicate the propensity for a “higher for longer” stance rather than keeping
    with additional rate hikes.
  • Recent key economic data like the
    latest employment report showed even more wage growth
    despite the unemployment rate ticking higher again, and the UK CPI beat expectations pointing to stagflation.
  • The UK PMIs missed expectations across the board with the
    Services sector plunging into contraction.
  • The market expects the BoE to hike
    by 25 bps in September.


  • The BoJ kept everything unchanged as expected at the last meeting but
    implicitly tweaked the YCC policy keeping the target band unchanged but giving
    more flexibility with a hard cap at 1.00%.
  • This has created lots of volatility
    in the JPY, but eventually led to a fast depreciation.
  • The Japanese CPI data surprised to the upside
    recently with the core-core reading reaching again the previous high.
  • The Tokyo CPI, which is seen as a leading
    indicator for national cpi, missed expectations, but the core-core reading
    matched the prior figure remaining well above the BoJ’s inflation target.
  • The Unemployment Rate surprisingly jumped to 2.7%
    although it remains near the lows.
  • BoJ’s Governor Ueda at the Jackson Hole Symposium
    reaffirmed that inflation is still below target and that’s why they’re sticking
    with their monetary easing.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the last leg
higher in the GBPJPY pair diverged with the
MACD and this
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the price pulled back to the previous resistance now turned support in what
could end up being a classic “break and retest” pattern as we have also the confluence with the
red 21 moving average. If the
price continues lower though, it will confirm the reversal and the next stop
should be the major trendline.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have also
the 50% Fibonacci retracement level at
the trendline for further confluence and the recent price action after the
bearish impulse looks like a bearish flag pattern.
If the price breaks below the 184.00 support, we can
expect the sellers to pile in and target the trendline. The buyers, on the
other hand, will want to see the price to break above the most recent swing
high to keep charging the 186.73 high and targeting a breakout.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a zone of interest for the market around the 184.75 level as the price
reacted to this area multiple times. This zone should act as kind of a
barometer for the sentiment. If the price stays above the level, we can expect
more higher highs, but if it stays below the level, then we can expect the
sellers to remain in control.

Upcoming Events

This week is an important one given that we will see
many key labour market data for the US, including the NFP, before the next FOMC
meeting. Weak data can send the market into risk off and support the JPY as a
safe haven, on the other hand, strong data might make the market to expect more
hawkish moves from the Fed and thus weigh on the JPY. Today, we have the US ADP
report and after yesterday’s misses, a weak report is likely to increase
recessionary fears. Moving on to tomorrow, we will see the US Jobless Claims and
the US PCE data. Finally, we conclude the week with the US NFP and the ISM
Manufacturing PMI on Friday. Although the Fed keeps all the options on the
table, it’s also leaning more towards a pause in September, so we will need a
very strong NFP to raise the chances of another hike at the upcoming meeting.

This article was written by FL Contributors at Source