Keep an Eye on GBPJPY Technical Analysis: Resistance Zone Holds the Key

UK:

• The BoE kept interest rates unchanged at the last meeting.
• The central bank is leaning more towards keeping interest rates “higher for longer”, although it kept a door open for further tightening if inflationary pressures were to be more persistent.
• The latest employment report showed a slowdown in wage growth and some job losses in September which could point to a softening labour market.
• The UK CPI today slightly beat expectations but given the softening in the labour market it’s unlikely to change the BoE’s stance.
• 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 remains near cycle lows.
• 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.
• The Tokyo CPI, which is seen as a leading indicator for national CPI, continues to fall although it remains above the BoJ target.
• The latest Japanese wage data missed expectations again which is unlikely to lead to a more hawkish BoJ in the near future.

GBPJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that the GBPJPY pair got rejected from the downward trendline where we had also the confluence with the 61.8% Fibonacci retracement level. The pair bounced back this week and it’s now approaching the trendline again. What happens around the trendline will likely decide the next direction for the pair.

GBPJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a strong resistance around the 183.00 level where we got multiple rejections except the fakeout into the trendline. We can expect the sellers to lean on this resistance with a defined risk above it to position for a drop into the 176.30 level. The buyers, on the other hand, will want to see the price breaking higher to pile in and start targeting the highs.

GBPJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the beat in the UK CPI data gave the pair some strength to push into the resistance. If the sellers succeed and the price starts falling from the resistance, we can expect even more sellers entering the market if the price breaks through the last swing low at 182.08.

Upcoming Events

Tomorrow we will get the latest US Jobless Claims report and the market will want to see if the miss in Continuing Claims last week was just a blip or the start of a trend. Later in the day, we will also hear from Fed Chair Powell where the market will be focused on any hint about the near-term policy outlook. On Friday, we will get the latest Japanese inflation figures and the UK Retail Sales data.

Strong US data or a hawkish Powell are likely to raise global yields, as we have seen yesterday with the strong US Retail Sales data, and this could weigh on the Yen and support the GBP. Conversely, weaker US data should lead to a fall in yields and support the downside in GBPJPY, especially if the Japanese CPI beats or UK Retail Sales miss.