Daily Analysis For GBP/JPY   19-06-2023

Daily Analysis For GBP/JPY 19-06-2023

GBP/JPY Analysis


Key Points: -

·       GBP/JPY is currently in a phase of consolidation, holding onto its impressive upward momentum, reaching its highest level since December 2015.


·       The market perceives the divergence in policies between the Bank of Japan (BoJ) and the Bank of England (BoE) as a critical factor that continues to provide substantial support to this currency pair.


·       As the bulls eagerly anticipate the release of UK consumer inflation figures and the upcoming BoE meeting, they carefully analyze the situation before making their next moves in the market.


Today's Scenario: -


The GBP/JPY currency pair enters a period of bullish consolidation on Monday, trading within a narrow range around the 181.80-181.25 area. This level is slightly below its highest point since December 2015, which was reached during the Asian session.


The Japanese Yen (JPY) continues to face downward pressure due to the dovish stance of the Bank of Japan (BoJ). This stance is considered a significant factor that supports the GBP/JPY cross. Last Friday, the BoJ decided to maintain its accommodative monetary policy, keeping interest rates unchanged at -0.1% and leaving its yield curve control policy intact. The central bank expects inflation to slow later this year.


In contrast, the Bank of England (BoE) is anticipated to raise its benchmark interest rates by 25 basis points on Thursday, potentially reaching the highest level since April 2008 at 4.75%. There is also speculation in the market of a larger rate increase of 50 basis points, further bolstering the British Pound and the GBP/JPY cross. However, market participants remain cautious and prefer to wait on the sidelines ahead of key data releases and the BoE policy meeting later this week. These events include the release of the latest UK consumer inflation figures.


Furthermore, the JPY benefits from its safe-haven status amidst a generally weak sentiment in the equity markets. This dynamic serves as a limiting factor for the upside potential of the GBP/JPY cross, at least for now. Nevertheless, considering the overall fundamental backdrop, the path of least resistance for spot prices appears to be upward. Any significant pullbacks in the pair may still be viewed as buying opportunities. As there are no significant economic releases expected on Monday, it is more likely that the cross will continue its sideways consolidation pattern.


Diagram of GBP/JPY: -


Economic Events: -


Date      Event                                                                                                             Impact       Currency

 04:00   (New Zealand) Services NZ PSI                                                                         Low     NZD

 04:00   (New Zealand) Composite NZ PCI                                                     Low    NZD

 05:30   (United States) Juneteenth                                                                            None     USD

 09:05   (Japan) 52-Week Bill Auction                                                                           Low     JPY

 13:30   (Australia) Myfxbook AUDUSD Sentiment                                 Medium AUD

 13:30   (Switzerland) Myfxbook USDCHF Sentiment                              Medium CHF

 13:30   (Japan) Myfxbook USDJPY Sentiment                                                      Medium   JPY

 13:30   (European Union) Myfxbook EURUSD Sentiment                                   Medium  EUR

 13:30   (United Kingdom) Myfxbook GBPUSD Sentiment                                   Medium  GBP

 13:30   (Canada) Myfxbook USDCAD Sentiment                                                 Medium    CAD

 13:30   (New Zealand) Myfxbook NZDUSD Sentiment                                        Medium  NZD

 13:30   (Euro Area) ECB Survey of Monetary Analysts                                                Low  EUR

 15:00   (Germany) 12-Month Bubill Auction                                                               Low    EUR

 16:00   (Portugal) Current Account                                                                              Low     EUR

 16:30   (Euro Area) ECB Lane Speech                                                                           Low     EUR

 17:10   (Euro Area) ECB Schnabel Speech                                                     Low    EUR

 18:00   (Canada) PPI YoY                                                                                Low       CAD

 18:00   (Canada) PPI MoM                                                                                           Low       CAD

 18:00   (Canada) Raw Materials Prices YoY                                                   Low    CAD

 18:00   (Canada) Raw Materials Prices MoM                                                              Low    CAD

 18:30   (France) 3-Month BTF Auction                                                                        Low     EUR

 18:30   (France) 12-Month BTF Auction                                                                      Low     EUR

 18:30   (France) 6-Month BTF Auction                                                                        Low     EUR

 19:30   (United States) NAHB Housing Market Index                              Medium USD

 23:30   (Euro Area) ECB Guindos Speech                                                      High   EUR


Buy Scenario: -


Despite the positive impact of the Bank of Japan's (BoJ) actions, there are some technical indications pointing towards a potential pullback in the GBP/JPY price. The relative strength index (RSI) at 14 periods suggests overbought conditions, and the currency pair is facing resistance in the horizontal zone marked in September-October 2015, around the levels of 180.40-80.


If the price manages to surpass 180.80, it will face further challenges at the psychological level of 181.00 and the 78.6% Fibonacci Expansion (FE) of its movements from September 2020 to December 2022, near 186.30. Additionally, the round figure of 190.00 will also act as a significant hurdle for GBP/JPY bulls. Till we do not advise to buy GBP/JPY.


Sell Scenario: -


On the downside, failure to achieve a weekly close above 180.80 could trigger a pullback towards the psychological level of 180.00 and potentially reach the 61.8% Fibonacci retracement level, located around 179.50.


Overall, the buyers of GBP/JPY maintain their optimism unless there is a weekly close below the previous resistance line from April 2022, situated near 176.20 as of the current time. Till we do not advise to sell GBP/JPY.


Support and Resistance Level: -

Support          Resistance  

S1 179.78   -  R1 183.00

S2 177.70  -   R2 184.13

S3 176.57  -   R3 186.21


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