GBPJPY Technical Analysis – Lower prices expected

UK:

• The BoE kept interest rates unchanged.
• The central bank is leaning more
  towards keeping interest rates “higher for longer” but it kept a door open for
  further tightening if inflationary pressures were to be more persistent.
• Key economic data like the latest employment report showed a very high wage growth
  despite the rising unemployment rate, but the latest UK CPI missed expectations across the board.
• 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.
• The Japanese CPI last week showed that inflationary
  pressures remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate surprisingly increased last month,
  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 and clarified that the
  recent comment on “quiet exit” from monetary easing was misinterpreted.
• The recent Japanese wage data showed a slowing in wage growth,
  and this is something the BoJ focuses on particularly.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the last leg
higher in GBPJPY diverged with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the price has eventually broken out of the key trendline and
38.2% Fibonacci retracement level
and confirmed the reversal. The pair is now likely to fall into the swing low
around the 176.32 level.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
break below the key trendline and the support around
the 38.2% Fibonacci retracement level. If the price breaks below the recent low
around the 180.70 level, the sellers are likely to pile in even more to extend
the fall into new lows. From a risk management perspective, a better short
opportunity would be around the downward trendline where there’s also the 38.2%
Fibonacci retracement level for confluence.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor downward trendline with the red 21 moving average for confluence where
the sellers are likely to step in targeting a break below the low. If the price
breaks above the trendline, the buyers should pile in to target a rally into
the major trendline and eventually a breakout.

Upcoming Events

Tomorrow, we will have the US Jobless Claims data,
which is very important for both the Fed and the market. Strong readings are
likely to keep global yields high, while weak figures might cause them to drop
and benefit the JPY. On Friday, we will get the latest US PCE data and a few
Japanese economic releases such as the Tokyo CPI, the Unemployment Rate and
Retail Sales. Strong Japanese data, especially the Tokyo CPI, might give the
JPY a boost.