Daily Analysis For GBP/JPY   20-06-2023

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.


Support and Resistance Level: -

Support          Resistance  

S1 181.18   -  R1 182.09

S2 180.75  -   R2 182.57

S3 180.27  -   R3 183.00


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