GBPJPY Technical Analysis

Considering today’s hot CPI report
and the recent incredibly strong Employment report with
high wage growth, the Bank of England (BoE) will continue to raise interest
rates in order to address one of the highest inflation rates among the major
economies. On the other hand, the Bank of Japan (BoJ) is expected to maintain
its accommodative monetary policy, which has played a big role in the
significant depreciation of the Japanese Yen (JPY) over the past two years.

This divergence in monetary policies should keep
the upward movement in the GBPJPY pair steady, all else being equal. Probably,
only concerns about a potential global economic recession can cause the pair to
decline or the BoJ will need to switch to a hawkish stance to defend the JPY

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that in the past
week GBPJPY has had an incredibly strong rally as the UK inflation and
employment data keep printing on the hot side. This is expected to keep the BoE
on track to raise rates with a terminal rate now seen in the 6% region vs. 5.25%
a couple of weeks ago. We can see that the price has overextended a bit as
depicted by the price distance from the blue 8 moving average. In such
instances, the price consolidates or pulls back into the moving average before continuing
in the original direction.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the moving
averages have crossed to the downside which may signal a deeper pullback in the
making. A good level for the buyers to lean on to is the upward trendline where we
can also find the Fibonacci retracement levels.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is bouncing from the previous swing low level. We saw an aggressive
selling in GBPJPY since the release of the hot UK CPI report this morning, so
this might be a signal that the price has gone too far too fast, and the market
needs to retrace. If the price breaks below the 179.90 level, we can expect
more sellers entering the market targeting the trendline, while a break above
the 181.25 resistance should
see more buyers piling in and extend the rally above the high, with the next
resistance standing at the 188.50 level.

This article was written by FL Contributors at Source