Published on Jun 13, 2023

Daily Analysis For GBP/JPY 13-06-2023

GBP/JPY Analysis

Key Points: -

· The GBP/JPY pair witnesses buying interest on Tuesday, halting the decline observed since reaching a multi-year high.

· The divergence in policies between the Bank of England (BoE) and the Bank of Japan (BoJ) serves as a positive factor, supporting the potential for additional gains in the near term.

· Investors are eagerly awaiting the release of the monthly UK employment data, which could provide significant momentum for the pair.

Today's Scenario: -

During the Asian session on Tuesday, the GBP/JPY pair showed a slight increase and halted the retracement from its highest level since January 2016. However, the pair lacks follow-through momentum and remains below the psychological level of 175.00. Traders are now turning their attention to the monthly employment data from the United States for a fresh market catalyst.

Market expectations for the UK jobs report indicate a decrease of 9.6K in the number of people claiming unemployment-related benefits in May. Additionally, the ILO Unemployment Rate is anticipated to slightly increase to 4% for the three months leading up to April. It is also expected that Average Hourly Earnings accelerated during the reported period, indicating persistent underlying price pressures. A positive surprise in the data would reinforce the belief that the Bank of England (BoE) will take a more aggressive approach to tighten its policy in order to address stubbornly high inflation. This, in turn, could provide support for the British Pound and the GBP/JPY pair.

On the other hand, concerns about a global economic slowdown and the possibility of intervention by Japanese authorities to support the domestic currency contribute to the safe-haven appeal of the Japanese Yen (JPY). As a result, traders are cautious about placing strong bullish bets on the GBP/JPY pair. Furthermore, expectations that the Bank of Japan (BoJ) will maintain its accommodative monetary policy stance could limit significant gains for the JPY. BoJ Deputy Governor Masazumi Wakatabe recently stated that there are compelling reasons to continue with ultra-easy monetary policy measures.

Considering the overall fundamental backdrop, the path of least resistance for the GBP/JPY pair seems to be on the upside, supporting the possibility of extending the recent upward trend observed over the past month. However, traders are opting to wait on the sidelines ahead of key UK macroeconomic data releases, including the monthly GDP report on Wednesday, as well as the BoJ monetary policy meeting scheduled for Friday.

Diagram of GBP/JPY: -

Economic Events: -

Date Event Impact Currency

4:15 (New Zealand) Visitor Arrivals YoY Low NZD

5:20 (Japan) BSI Large Manufacturing QoQ Low JPY

6:00 (Australia) Westpac Consumer Confidence Change High AUD

6:00 (Australia) Westpac Consumer Confidence Index High AUD

7:00 (Australia) NAB Business Confidence High AUD

11:30 (Germany) Harmonised Inflation Rate MoM Low EUR

11:30 (Germany) Harmonised Inflation Rate YoY Low EUR

11:30 (Germany) Inflation Rate MoM Medium EUR

11:30 (Germany) Inflation Rate YoY Medium EUR

11:30 (Germany) CPI High EUR

11:30 (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr) Low GBP

11:30 (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr) Medium GBP

11:30 (United Kingdom) Unemployment Rate High GBP

11:30 (United Kingdom) Claimant Count Change High GBP

11:30 (United Kingdom) Employment Change High GBP

11:30 (United Kingdom) HMRC Payrolls Change Low GBP

12:30 (Lithuania) Current Account Low EUR

12:30 (Spain) CPI High EUR

12:30 (Spain) Core Inflation Rate YoY Low EUR

12:30 (Spain) Harmonised Inflation Rate MoM Low EUR

12:30 (Spain) Harmonised Inflation Rate YoY Low EUR

12:30 (Spain) Inflation Rate MoM Low EUR

12:30 (Spain) Inflation Rate YoY Low EUR

13:30 (China) Total Social Financing Low CNY

13:30 (China) New Yuan Loans Low CNY

13:30 (China) M2 Money Supply YoY Low CNY

13:30 (China) Outstanding Loan Growth YoY Low CNY

14:10 (Spain) 3-Month Letras Auction Low EUR

14:30 (Euro Area) ZEW Economic Sentiment Index Medium EUR

14:30 (Germany) ZEW Economic Sentiment Index High EUR

14:30 (Germany) ZEW Current Conditions Low EUR

14:30 (United Kingdom) 10-Year Treasury Gilt Auction Low GBP

14:40 (Italy) 3-Year BTP Auction Low EUR

14:40 (Italy) 7-Year BTP Auction Low EUR

14:40 (Italy) 30-Year BTP Auction Low EUR

15:00 (Germany) 5-Year Bobl Auction Low EUR

15:15 (Euro Area) ECB Enria Speech Low EUR

15:30 (Latvia) Current Account Low EUR

15:30 (United States) NFIB Business Optimism Index Low USD

17:30 (Ecuador) Balance of Trade Low USD

18:00 (United States) Core Inflation Rate MoM Medium USD

18:00 (United States) Inflation Rate MoM High USD

18:00 (United States) Core Inflation Rate YoY High USD

18:00 (United States) Inflation Rate YoY High USD

18:00 (United States) CPI High USD

18:00 (United States) CPI s.a High USD

18:15 (Germany) Current Account Low EUR

18:25 (United States) Redbook YoY Low USD

19:30 (United Kingdom) BoE Gov Bailey Speech Medium GBP

20:30 (United Kingdom) BoE Dhingra Speech Low GBP

21:00 (United States) 52-Week Bill Auction Low USD

22:30 (United States) 30-Year Bond Auction Low USD

Buy Scenario: -

The GBP/JPY pair gained around 50 pips as the UK's Claimant Count Change for May showed a decline of 13.6K, surpassing the expected decline of 9.6K and the previous reading of 46.7K. Additionally, the ILO Unemployment Rate for the three months leading up to April came in at 3.8%, lower than the previous reading of 3.9% and the market forecast of 4.0%.

In the bond market, US 10-year and two-year Treasury yields bounced back from their intraday lows after a two-day decline. At the latest, the yields were mildly offered near 3.74% and 4.57% respectively.

From a technical perspective, the GBP/JPY pair rebounded from the 100-Hour Moving Average (HMA) following the positive UK data. The recovery from this key moving average is also supported by bullish signals from the MACD indicator and a positive RSI (14) line, indicating that buyers are still in control.

However, there is an upward-sloping resistance line from May 28, currently around 175.70, which could pose a challenge for GBP/JPY bulls as the RSI (14) line approaches the overbought territory. Till we do not advise to buy GBP/JPY.

Sell Scenario: -

On the downside, if the pair breaks below the 100-HMA around 174.55, it may face resistance from the 61.8% Fibonacci retracement level of its upside move from May 31 to June 12, located near 173.65, which could further push the pair downwards.

Even if the quote breaks below the 173.65 Fibonacci retracement support, the monthly low around 172.65 and the October 2022 peak around 172.15 are likely to provide some support and limit the pair's downward movement. Till we do not advise to sell GBP/JPY.