Published on Jun 16, 2023

Daily Analysis For GBP/JPY 16-06-2023

GBP/JPY Analysis

Key Points: -

· GBP/JPY sees some buying interest on Friday and reaches a new multi-year high.

· The Bank of Japan's decision to maintain its current policy stance weighs on the Japanese Yen and provides support for the GBP/JPY cross.

· The market's expectations for additional rate hikes by the Bank of England (BoE) also bolster the British Pound and contribute to the upward movement of the pair.

Today's Scenario: -

The GBP/JPY cross reversed a dip during the Asian session and surged to its highest level since December 2015 following the Bank of Japan's (BoJ) policy announcement. As widely expected, the BoJ maintained its accommodative policy stance without making any changes. The Japanese Yen (JPY) weakened due to reduced expectations of government intervention to stabilize the currency and a positive sentiment in equity markets. These factors contributed to dip-buying in GBP/JPY.

The British Pound (GBP) continued to receive support as market participants anticipate further interest rate hikes by the Bank of England (BoE). Inflation in the UK remains high, well above the 2% target, with expectations of another 25 basis point increase on June 22. There is also growing speculation that interest rates may peak at 5.5% later this year. These expectations act as a tailwind for the GBP/JPY cross.

However, the daily Relative Strength Index (RSI) is indicating overbought conditions, which could limit fresh bullish bets on GBP/JPY. Traders may wait for further cues, including comments from BoJ Governor Kazuo Ueda, for new market direction. Despite potential caution, the cross is on track to record significant weekly gains and appears poised to continue its upward trend observed over the past five weeks.

Diagram of GBP/JPY: -

Economic Events: -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

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

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

12:30 (Austria) CPI High EUR

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

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

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

According to the daily chart, the GBP/JPY has a bullish outlook for the short term. However, it is worth noting that the cross is currently trading at multi-year highs and the Relative Strength Index (RSI) indicates overbought conditions. This suggests that a healthy downward correction could be in store.

If the pair continues its upward momentum, it may encounter resistance around the 179.50 level, followed by the psychological level at 180.00 and the 180.50 zone. Till we do not advise to buy GBP/JPY.

Sell Scenario: -

On the downside, if the pair undergoes a correction, immediate support levels can be found around the 177.40 area. Further support lies at the psychological level of 175.00 and the 20-day Simple Moving Average (SMA) at 174.05. Traders should monitor price action and indicators closely to gauge the strength of the trend and potential reversal signals. Till we do not advise to sell GBP/JPY.