GBP/JPY Price Analysis: Sees further downside below 180.00 as BoE-BoJ policy divergence widens
|- GBP/JPY is expected to deliver more weakness as BoE-BoJ policy divergence widens.
- The BoE raises interest rates by 25 bps to 5.25% and comments that the bank rate will stay "sufficiently restrictive for sufficiently long".
- GBP/JPY delivers a breakdown of the consolidation formed in a range of 181.75-182.70.
The GBP/JPY pair bounces back after a vertical sell-off to near 180.50 in the European session. The cross discovers strength as the Bank of England (BoE) raises interest rates by 25 basis points (bps) to 5.25% to build more pressure on stubborn inflation.
Out of the nine-member led Monetary Policy Committee (MPC), BoE policymaker Swati Dhingra voted for a steady interest rate decision. BoE Governor Andrew Bailey conveyed that the bank rate will stay "sufficiently restrictive for sufficiently long" to return to the inflation target.
An interest rate hike by the United Kingdom's central bank has widened the BoE-Bank of Japan (BoJ) policy divergence. Last week, the BoJ allowed more flexibility to the Yield Curve Control (YCC) that would soft bond-buying operations.
GBP/JPY delivers a breakdown of the consolidation formed in a range of 181.75-182.70 on an hourly scale. A breakdown of the consolidation results in wider ticks and heavy volume. A declining 20-period Exponential Moving Average (EMA) indicates that the short-term trend is bearish.
The Relative Strength Index (RSI) (14) shifts into the bearish range of 20.00-40.00, which indicates that the downside momentum is active.
Pound Sterling exposes to more downside if the cross drops below the immediate support of 180.50. A decisive breakdown would drag the asset towards July 13 low at 179.50, followed by July 27 low at 177.40.
On the flip side, a recovery move above July 31 high at 183.20 would drive the asset toward July 05 high at 184.00. Breach of the latter would drive the asset into unchartered territory.
GBP/JPY hourly chart
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