Published on Jun 14, 2023

Daily Analysis For GBP/JPY 14-06-2023

GBP/JPY Analysis

Key Points: -

· During Wednesday's Asian session, GBP/JPY experiences a retreat from a recently reached multi-year high.

· The Japanese yen, considered a safe-haven currency, gains support from a more cautious market sentiment, leading to profit-taking on the cross.

· The differing policy outlooks between the Bank of Japan (BoJ) and the Bank of England (BoE) contribute to limiting the downward movement as market participants await a significant release of macroeconomic data from the UK.

Today's Scenario: -

GBP/JPY remains slightly lower around the 176.70-80 level, showing limited response to UK economic data in the early morning hours in London. The currency pair is consolidating after experiencing its largest daily gain in 1.5 months and reaching the highest levels since January 2016 on the previous day.

With anticipation building ahead of the Federal Reserve's monetary policy announcements and a relatively light Asian calendar, GBP/JPY bulls take a breather during the early part of this important day. The pair's recent movements are also influenced by mixed British data and lackluster Treasury bond yields.

Regarding the UK statistics, the headline Gross Domestic Product (GDP) for April shows growth matching the previous month's figure of 0.2%, while Industrial Production declines during the same period. Both Industrial Production and the Index of Services for the three months leading up to April disappoint.

It is worth noting that previous job numbers and inflation data from the UK have raised concerns about a potentially hawkish stance from the Bank of England (BoE), which keeps buyers of the British Pound (GBP) optimistic despite the recent mixed data.

On the other hand, Japanese inflation figures have been improving recently, but officials from the Bank of Japan (BoJ) continue to defend their ultra-easy monetary policy stance. Another factor that could impact GBP/JPY is the upcoming issuance of multi-billion-dollar bonds by the US Treasury Department due to the US debt-ceiling deal.

Additionally, US 10-year Treasury bond yields retreat from a 13-day high of 3.83% to 3.80%, while the two-year yields reach their highest levels in three months at 4.70% before easing to 4.66% at the latest. This has restrained the bullish momentum of GBP/JPY.

Looking ahead, GBP/JPY may maintain its positive bias due to the divergence between the BoE and BoJ policies. However, concerns about the UK's economic transition could cause temporary volatility in the pair.

Diagram of GBP/JPY: -

Economic Events: -

Date Event Impact Currency

02:00 (United States) API Crude Oil Stock Change Medium USD

04:15 (New Zealand) Current Account Medium NZD

05:30 (New Zealand) Food Inflation YoY Low NZD

10:00 (Netherlands) Balance of Trade Low EUR

10:30 (Finland) Inflation Rate YoY Low EUR

10:30 (Finland) Inflation Rate MoM Low EUR

10:30 (Finland) CPI Low EUR

11:30 (United Kingdom) GDP 3-Month Avg Medium GBP

11:30 (United Kingdom) Goods Trade Balance Non-EU High GBP

11:30 (United Kingdom) Balance of Trade Low GBP

11:30 (United Kingdom) Construction Output YoY Low GBP

11:30 (United Kingdom) Industrial Production YoY Low GBP

11:30 (United Kingdom) Industrial Production MoM Medium GBP

11:30 (United Kingdom) Manufacturing Production YoY Low GBP

11:30 (United Kingdom) Manufacturing Production MoM Medium GBP

11:30 (United Kingdom) Goods Trade Balance High GBP

11:30 (United Kingdom) GDP YoY Low GBP

11:30 (United Kingdom) GDP MoM High GBP

11:30 (Germany) Wholesale Prices MoM Medium EUR

11:30 (Germany) Wholesale Prices YoY Medium EUR

12:30 (China) FDI (YTD) YoY Medium CNY

12:30 (Slovakia) Inflation Rate MoM Low EUR

12:30 (Slovakia) Inflation Rate YoY Low EUR

12:30 (Slovakia) Core Inflation Rate MoM Low EUR

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

12:30 (Slovakia) CPI Low EUR

13:30 (France) IEA Oil Market Report Medium EUR

14:30 (Euro Area) Industrial Production MoM Medium EUR

14:30 (Euro Area) Industrial Production YoY Low EUR

14:30 (Montenegro) GDP Growth Rate YoY Low EUR

15:00 (Germany) 10-Year Bund Auction Medium EUR

15:30 (Portugal) Inflation Rate MoM Low EUR

15:30 (Portugal) Inflation Rate YoY Low EUR

15:30 (Portugal) CPI Low EUR

15:30 (Ireland) Residential Property Prices YoY Low EUR

15:30 (Ireland) Residential Property Prices MoM Low EUR

16:30 (United States) MBA 30-Year Mortgage Rate Medium USD

16:30 (United States) MBA Mortgage Applications Low USD

16:30 (United States) MBA Mortgage Refinance Index Low USD

16:30 (United States) MBA Mortgage Market Index Low USD

16:30 (United States) MBA Purchase Index Low USD

17:00 (United Kingdom) NIESR Monthly GDP Tracker Low GBP

18:00 (Canada) New Motor Vehicle Sales Low CAD

18:00 (United States) Core PPI MoM Medium USD

18:00 (United States) Core PPI YoY Low USD

18:00 (United States) PPI YoY Low USD

18:00 (United States) PPI MoM High USD

20:00 (United States) EIA Heating Oil Stocks Change Low USD

20:00 (United States) EIA Refinery Crude Runs Change Low USD

20:00 (United States) EIA Crude Oil Stocks Change Medium USD

20:00 (United States) EIA Distillate Stocks Change Low USD

20:00 (United States) EIA Gasoline Production Change Low USD

20:00 (United States) EIA Crude Oil Imports Change Low USD

20:00 (United States) EIA Gasoline Stocks Change Medium USD

20:00 (United States) EIA Cushing Crude Oil Stocks Change Low USD

20:00 (United States) EIA Distillate Fuel Production Change Low USD

21:00 (United States) 17-Week Bill Auction Low USD

23:30 (United States) Fed Interest Rate Decision High USD

23:30 (United States) FOMC Economic Projections High USD

23:30 (United States) Interest Rate Projection - 1st Yr Medium USD

23:30 (United States) Interest Rate Projection - 2nd Yr Medium USD

23:30 (United States) Interest Rate Projection - Current Medium USD

23:30 (United States) Interest Rate Projection - Longer Medium USD

Buy Scenario: -

From a technical perspective, the short-term outlook for GBP/JPY remains bullish. However, certain indicators have reached overbought levels, suggesting a potential downward correction as the cross continues to trade at multi-year highs since mid-May. The Relative Strength Index (RSI) has risen above 70.00, indicating overbought conditions, and the Moving Average Convergence Divergence (MACD) remains in positive territory.

If GBP/JPY manages to break above the 176.80 area, it could lead to a more significant upward move towards the psychological level of 177.00 and the zone around 177.50. Till we do not advise to buy GBP/JPY.

Sell Scenario: -

On the downside, if the cross undergoes a correction, support levels are located around the 174.50 area and below the psychological level of 174.00, with additional support near the 20-day Simple Moving Average (SMA) at 173.40. Till we do not advise to sell GBP/JPY.