UK:
- 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 economic data is not
supporting the BoE stance as 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 BoE is expected to hike by another
25 bps in September.
Japan:
- The BoJ kept everything unchanged as expected but implicitly tweaked
the YCC policy keeping the target band unchanged but giving more flexibility
with a hard cap at 1.00%. - They basically widened the YCC band
without stating it explicitly. - This has created lots of volatility
in the JPY, but eventually led to a fast depreciation. - The BoJ has also already intervened
twice to smooth the rise in yields ultimately weighing on the JPY. - Last week, the Japanese CPI data surprised to the upside with
the core-core reading reaching again the previous high.
GBPJPY Technical Analysis –
Daily Timeframe
On the daily chart, we can see that GBPJPY recently
broke above the 184.00 high and extended the rally towards the 186.50 level.
The price action has been rangebound since the last week as the market is
probably awaiting a catalyst for the next major move. We can also notice that
the price is diverging with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. So, if we see the price falling back below the 184.00 handle, we can
expect a move lower into the trendline at very
least.
GBPJPY Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that we have good support area
around the 184.00 handle where we can also find the 38.2% Fibonacci retracement level.
This is where we can expect the buyers to pile in with a defined risk below the
level to target a new high. The sellers, on the other hand, will want to see
the price breaking lower to pile in and extend the fall into the trendline.
GBPJPY Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that we
have a minor swing support level at 185.46 where the price has recently bounced
from. A break below that level would see more sellers coming into the market
and push the price into the 184.00 support. On the upside, a break above the 185.60
swing level should see more buyers piling in to extend the rally into the
186.75 high.
Upcoming Events
This week is
pretty empty on the economic data side as we will only have the UK PMIs today
and the US Jobless Claims tomorrow. If the UK PMIs surprise to the downside, we
can expect the GBPJPY to depreciate and vice versa if the PMIs surprise to the
upside. Strong US Jobless Claims might push global yields higher and take the
GBPJPY with it. On the other hand, very weak data can cause recessionary fears
and lead to risk off across the board which would give the JPY a tailwind.
Remember also that this is the Jackson Hole Symposium week, so we will hear
from many central bankers including Fed Chair Powell, who is set to speak on
Friday.
This article was written by FL Contributors at www.forexlive.com. Source