The BoE last
week surprised with a 50 bps hike following another hot CPI report the day
before. In fact, core inflation rose to another record high and given the
previous data like the very strong employment report where wages have risen
much more than expected, the BoE decided that a bigger hike was necessary. This
has given the GBP another boost although the upside momentum is starting to
fade.
Conversely, recently we saw another hot core
inflation report from Japan and the recent BoJ’s Summary of Opinions showed
that the board is now less sure about inflation slowing back to 2% by the
middle of fiscal year, which is something they’ve been citing very often, and
one member called for a revision of their YCC policy.
This might be a hint of a BoJ policy tweak coming
at the next meeting, but the market has been disappointed many times by the BoJ
in the past months, so it’s a tough call to make.
GBPJPY Technical Analysis –
Daily Timeframe
GBPJPY Daily
On the daily chart, we can see that GBPJPY has gone
parabolic since the hot employment report two weeks ago. The bullish trend is
still intact as the price keeps printing higher highs and higher lows and the moving averages are well
crossed to the upside. If we get a bigger pullback, we can expect the buyers
waiting for the price to come into the trendline and the
red 21 moving average to re-enter the market all else being equal.
GBPJPY Technical Analysis –
4 hour Timeframe
GBPJPY 4 hour
On the 4 hour chart, we can see that this latest
move higher is diverging with the
MACD. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. At the moment, we can see that the price is supported by the minor
upward trendline and the red 21 moving average. If the price breaks below the
trendline, we should see the price extending the fall into the 179.92 swing low
level which would be the natural target of the divergent setup.
GBPJPY Technical Analysis –
1 hour Timeframe
GBPJPY 1 hour
On the 1 hour chart, we can see that the
price is trading within a rising channel. The nearest support zone is the
183.00 level where we have confluence with
the previous resistance now
turned support, the trendline, the 38.2% Fibonacci
retracement level and the 4-hour 21 moving average.
This is where we should expect the buyers entering the market with a defined
risk below the trendline. On the other hand, the sellers will wait for the
price to break below the trendline to pile in and extend the eventual selloff
into the 179.92 level.
See also the video below: