Published on Jun 20, 2023

Daily Analysis For GBP/JPY 20-06-2023

GBP/JPY Analysis

Key Points: -

· GBP/JPY is currently trading near seven-year highs around 182.00, with the market's attention turning to UK inflation.

· Last week, the Bank of Japan (BoJ), under Governor Haruhiko Kuroda, decided to maintain its existing policy without making any changes.

· However, there is increasing recognition that additional stimulus may be necessary to address inflationary pressures stemming from domestic factors.

· In the UK, discussions are underway regarding providing fiscal support to households to mitigate the impact of high mortgage prices. However, there seems to be some hesitation from individuals like Jeremy Hunt, indicating reluctance towards implementing such measures.

Today's Scenario: -

The GBP/JPY pair is currently trading near a fresh seven-year high around 182.00 during the European session. The Bank of Japan (BoJ) has decided to maintain its interest rates unchanged at -0.15% and keep its yields below the 0.5% threshold. BoJ Governor Kazuo Ueda has chosen to keep the monetary policy unchanged, as more stimulus measures are required to combat inflationary pressures arising from domestic factors. The BoJ aims to address the inflationary pressures by increasing wages and domestic demand, thereby supporting inflation levels above 2%.

On the other hand, the Pound Sterling has been displaying strength due to expectations that UK inflation will remain elevated, as labor market conditions continue to tighten. The preliminary report indicates that monthly headline inflation for May has grown at a slower pace of 0.4%, compared to the 1.2% pace registered in April. Annualized headline CPI is expected to soften to 8.5% from the previous release of 8.7%, while core inflation, which excludes oil and food prices, is expected to remain steady at 6.8%.

UK Finance Minister Jeremy Hunt has expressed reluctance in providing fiscal support to households to offset the impact of high mortgage prices, as reported by the Financial Times. Fiscal support to the economy could potentially mitigate the impact of the Bank of England's (BoE) tight monetary policy and contribute to inflationary pressures.

Following the UK inflation release, the market will shift its focus to the interest rate decision by BoE Governor Andrew Bailey, which is anticipated to maintain a highly hawkish stance.

Diagram of GBP/JPY: -

Economic Events: -

Date Event Impact Currency

02:30 (New Zealand) Westpac Consumer Confidence Low NZD

06:45 (China) Loan Prime Rate 1Y Medium CNY

06:45 (China) Loan Prime Rate 5Y Medium CNY

07:00 (Australia) RBA Meeting Minutes High AUD

07:05 (Australia) RBA Kent Speech Medium AUD

09:00 (Australia) RBA Bullock Speech Medium AUD

10:00 (Japan) Industrial Production MoM Low JPY

10:00 (Japan) Industrial Production YoY Low JPY

10:00 (Japan) Capacity Utilization MoM Low JPY

10:30 (Estonia) PPI YoY Low EUR

10:30 (Estonia) PPI MoM Low EUR

10:30 (Finland) Unemployment Rate Low EUR

11:30 (Germany) PPI MoM Medium EUR

11:30 (Germany) PPI YoY Low EUR

11:30 (Switzerland) Balance of Trade Medium CHF

13:30 (Euro Area) Current Account Low EUR

13:30 (Euro Area) Current Account s.a Low EUR

13:30 (Greece) Current Account Low EUR

13:30 (Euro Area) ECB Enria Speech Low EUR

14:30 (Euro Area) Construction Output YoY Low EUR

14:30 (Italy) Current Account Low EUR

14:30 (United Kingdom) 5-Year Treasury Gilt Auction Low GBP

15:00 (Germany) 2-Year Schatz Auction Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

15:30 (Luxembourg) Unemployment Rate Low EUR

15:30 (Slovakia) Unemployment Rate Low EUR

16:00 (United States) Fed Bullard Speech Medium USD

17:15 (Euro Area) ECB McCaul Speech Low EUR

18:00 (United States) Housing Starts Medium USD

18:00 (United States) Building Permits High USD

18:00 (United States) Housing Starts MoM Medium USD

18:00 (United States) Building Permits MoM Medium USD

19:00 (Slovenia) Unemployment Rate Low EUR

19:15 (Euro Area) ECB McCaul Speech Low EUR

20:30 (New Zealand) Global Dairy Trade Price Index Low NZD

21:00 (United States) 3-Month Bill Auction Low USD

21:00 (United States) 6-Month Bill Auction Low USD

21:15 (United States) Fed Williams Speech Medium USD

22:30 (El Salvador) Balance of Trade Low USD

22:40 (Euro Area) ECB Guindos Speech High EUR

Buy Scenario: -

On the upside, the immediate resistance level is seen at the recent cycle high of 182.12, which was reached on Friday. If the pair manages to surpass this level, it will enter uncharted territory, indicating the potential for further gains. Till we do not advise to buy GBP/JPY.

Sell Scenario: -

According to the daily chart, the technical outlook for the GBP/JPY pair is clearly bullish. The pair is trading above its main Simple Moving Averages of 20, 100, and 200 days, indicating a positive trend. Although some indicators have shown signs of correction, they still remain in overbought conditions. This suggests that there may be further corrections in the near term, but overall the outlook remains favorable for the GBP.

In terms of support levels, there are key levels at 179.00, 178.50, and 178.00, which may provide downside support if the pair experiences a pullback. Till we do not advise to sell GBP/JPY.