- GBP/JPY pulled back below 156.00 on Friday, although the uptrend from January remains in place.
- The pair will focus on risk appetite, BoE Bailey comments and UK GDP figures next week.
Despite a modest rally in the US equity space that would normally have a positive impact on the GBP/JPY, the pair pulled back on Friday, dipping back below the 156.00 level, though finding support above 155.50. However, the pair is still trading a decent amount above its levels prior to the BoE’s aggressive surprise below 155.50, and looks poised to close the week 1.0% higher despite the 0.3% retracement of the Friday from weekly highs in the 156.50 area.
Looking at the pair from a technical perspective, the uptrend that has dominated since Jan 24 is still in play and if anything, Friday’s pullback is just a reversal of this trend. Short term technical momentum continues to head up and the bulls expect risk appetite to stabilize early next week and facilitate a recovery towards this week’s highs in the 156.50 area and perhaps the 18th Jan highs. January just below 157.00 beyond.
In fundamental terms, central bank divergence may also favor further GBP/JPY upside, with BoJ Governor Haruhiko Kuroda showing his dovish credentials on Friday in stark contrast to the inflation-worried BoE raising rates. for the second consecutive meeting this week. On which note, BoE Governor Andrew Bailey will speak next Wednesday ahead of the release of UK Q4 GDP and December activity figures on Friday. The data calendar in Japan contains a handful of level two releases that are unlikely to affect the JPY.
Additional technical levels
Source: Fx Street
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