The BoE hiked by 25 bps as
expected as the UK CPI missed expectations across the board and UK employment report showed a mixed picture with both
the unemployment rate and wage growth higher. The central bank seemed to be
leaning more on the less hawkish side as a key line in the statement was
tweaked to indicate the propensity for a “higher for longer” stance rather than
a “higher-er for longer” one.
On the other hand, the BoJ kept everything unchanged as expected but implicitly tweaked
the YCC policy keeping the target band unchanged but giving more flexibility
with a hard cap at 1.00%. So, they basically widened the YCC band without
stating it explicitly. This has created lots of volatility in the JPY, but
eventually led to a fast depreciation. The BoJ last week intervened twice to
smooth the rise in yields ultimately weighing on the JPY.
GBPJPY Technical Analysis –
Daily Timeframe
GBPJPY Daily
On the daily chart, we can see the big downward
spike following the leak from Nikkei about the BoJ’s intention to tweak the YCC
the day prior to the decision and then the big rally following the actual
tweak. This may have been a “sell the fact” reaction or the market expected
something more, it’s not clear. What’s clear is that the BoJ intervened in the
bond market twice last week weakening again the JPY. This is leading to a
choppy price action as the market struggles to find a clear direction.
GBPJPY Technical Analysis –
4 hour Timeframe
GBPJPY 4 hour
On the 4 hour chart, we can see that GBPJPY has
been confined in a range between the 179.92 support and the
182.50 resistance. The price is now breaking above the resistance zone and the
buyers look determined to push it into the 184.00 handle. A lot will depend on
the economic data, but for now the bullish momentum is prevailing.
GBPJPY
Technical Analysis – 1 hour Timeframe
GBPJPY 1 hour
On the 1 hour chart, we can see that we
have a minor resistance at 183.00. If the price breaks above it, we can expect
more buyers piling in to extend the rally into the 184.00 handle. The sellers,
on the other hand, will want to see the price breaking below the 182.25 level
to confirm a fakeout and start targeting the bottom of the range at 179.92.
Upcoming Events
This week the
main event will be the US CPI report on Thursday. The market is likely to focus
more on the Core readings as this is what the Fed is more interested in. Higher
than expected data may weigh on global bond yields and lead to a depreciation
in the JPY given the BoJ’s dovish stance. On the other hand, lower than
expected readings may have an inverse effect and give the JPY a boost. At the
same time of the US CPI data, we will also see the latest US Jobless Claims
report. The market cares a lot about the labour market data, so big surprises
should affect the market as a whole. Finally, we conclude the week with the
University of Michigan Consumer Sentiment report on Friday where the market is
likely to focus more on the inflation expectations figures.