- GBP/JPY takes a step forward and regains territory for the day.
- Downside risks remain, but easing yen flows are helping to support the pair.
- UK data remains disappointing, but inflation risks remain a sticking point, keeping rate expectations elevated.
The pair GBP/JPY moves upward, since the British Pound (GBP) remains on the rise compared to Japanese yen (JPY)but it has been a back and forth action on mixed market expectations for both currencies for the mid-week session.
The Pound fell to a session low of 183.20 early on Wednesday but has since rallied, marking a short-term high of 184.40 in the US trading session. The Guppy is now moving around 184.50.
The economic calendar has provided some difficulties for the British pound, with key indicators for the UK generally failing to signal. July’s Industrial Production figures missed the mark, down 0.7% versus the -0.6% expected, and well below the previous figure of 0.5%, erasing all of the previous month’s growth.
UK data remains disappointing, but inflationary pressures continue to complicate the Bank of England’s path.
July manufacturing production managed to surprise, but remains in contraction, with -0.8% compared to the expected -1%. The indicator moves away from the 2.4% of the previous month.
The figures for the Gross Domestic Product (GDP) for the month of July also turned around, registering a decrease of 0.5%, compared to the -0.2% expected, and receding from the increase of 0.5% in the previous period.
Despite lagging economic data, the Bank of England (BoE) remains in a difficult situation, and market bets on continued rate hikes are increasing. Despite a shaky economic outlook, the UK continues to face inflationary pressures through rising wages, and the BoE could be forced to continue raising benchmark rates in the short term. The UK already faces some of the highest interest rates in the G7, and continued rate hikes could threaten to plunge the economy into recession territory, even as the BoE attempts to plug the inflation bleed.
The GBP/JPY pair is being helped by the reversal of the yen, which is moving lower in the market as investors cool off from excessive risk appetite sparked recently by the Bank of Japan (BOJ) rate-friendly comments. . BOJ Governor Kazuo Ueda warned last weekend that the Bank of Japan could backtrack on its negative rate policy if economic data suggests the Japanese central bank is sticking to its 2% inflation target consistently. significant.
Markets were reeling on the news, sending the Yen climbing the charts early in the American session, but things are starting to relax. Japanese inflation, although currently remaining above the BOJ’s desired level, is expected to plummet in the coming months, and there are fears that the BOJ will not be able to maintain price growth at a healthy level heading into End of the year.
GBP/JPY Technical Outlook
The Guppy hit a new daily high for the first time in over a month and the 184.00 area is proving particularly sticky. The 100-hour SMA threatens to turn bullish from 183.70, providing support while the 50-hour SMA consolidates and threatens to cross to the upside. Higher lows on the hourly candles also offer support from 182.80 to 183.20, while last week’s high at 184.40 remains a key resistance zone for the candles to overcome.
On the daily candles, the descending trend line from the late August highs at 186.75 remains intact, and the price action is being pressured by the rejection of the 50-day SMA near 183.00. If bids are able to congregate enough from this level, a new leg to the upside will be seen from the bounce off the 50-day SMA, but to the downside new challenges will be seen from the 100-day SMA currently parked near the zone. from 179.00.
The British Pound has been consolidating against the Yen on a weekly basis for a month now, with lows testing deeper waters, and with GBP/JPY well extended from 2023 opening lows near 156.00, a downturn could see the pair settle lower sooner long-term market forces will restore the long-term uptrend.
GBP/JPY daily chart
GBP/JPY technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
