The BoE surprised at the last meeting delivering a
50 bps rate hike instead of the 25 bps expected as the hot employment report
and the higher inflation data forced the central bank to choose a more
aggressive action. Yesterday we got another employment report and this
time it missed expectations on the jobs side but beat again on the wages side
which points to a wage price spiral in action. In fact, the market is pricing
in a higher chance of a 50 bps hike at the next meeting, although the UK CPI
report next week will probably decide if it’s going to be 25 bps or 50 bps.
On the other hand, the BoJ remains stuck with its
dovish monetary policy even if Japan’s core inflation keeps climbing to new
highs. There are tentative signs of a possible exit from this policy though but
the recent comments from the BoJ board members suggest that we won’t see any
change in the near future.
GBPJPY Technical Analysis –
Daily Timeframe
On the daily chart, we can see that after the
incredibly strong rally out of the hot UK employment report in June the
momentum started to wane near the 183.00 level. The price then started to pull
back into the trendline but
without a change in the fundamentals, so this looks like a technical
retracement from overstretched levels. The moving averages are also
threatening a bearish crossover, which is something to watch closely.
GBPJPY
Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the rising wedge around
the 183.00 led to the deeper pullback once the price broke out to the downside.
We can see that we also had a divergence with the
MACD
signalling weakening momentum and a possible pullback or reversal coming. The
price is now near a strong support zone
where we can find the trendline, the 180.00 round number, the base of the wedge
pattern and the 38.2% Fibonacci retracement level.
GBPJPY Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that we
have another divergence with the MACD right when the price is nearing the
strong support zone. We should see the buyers stepping in here with a defined
risk below the level and target a new high into the 185.00 level. More
conservative buyers may want to wait for the price to first break above the
downward minor trendline before piling in. The sellers, on the other hand, will
want to see the price breaking below the strong support zone to pile in
aggressively and extend the selloff towards the 173.00 level.
This article was written by FL Contributors at www.forexlive.com.