- The GBP/JPY takes a step up to reclaim green territory for the day.
- Downside risks remain, but easing Yen flows are helping to prop up the pair.
- UK data continues to disappoint, but inflation risks remain a sticking point, keeping rate expectations elevated.
The GBP/JPY is seeing some topside action as the Pound Sterling (GBP) holds the high side against the Japanese Yen (JPY), but it’s been back-and-forth action on mixed market expectations for both currencies for the mid-week trading session.
The Sterling fell to a session low of 183.20 early in Wednesday trading but has since recovered, chalking in a near-term high of 184.40 in the American trading session. The Guppy now trades into the middle, waffling into the 184.00 handle.
The economic calendar has seen some struggles for the GBP, with key indicators for the United Kingdom (UK) generally missing the mark. Industrial Production figures for July missed the mark, declining 0.7% versus the expected -0.6%, and well below the previous printing of 0.5%, erasing all of the previous month’s growth.
UK data continues to disappoint, but inflation pressures continue to complicate the BoE's path forward
Manufacturing Production for July managed to squeeze out a topside surprise, but still printed in contraction territory, coming in at -0.8% against the expected -1%. The indicator is steeply off the previous month’s 2.4% reading.
Gross Domestic Product (GDP) figures for the month of July also threw a wrench in the works, printing a 0.5% decline against the expected -0.2%, and walking back the previous period’s 0.5% increase.
Despite the lagging economic data, the Bank of England (BoE) remains in a tough spot, and market bets of continued rate hikes are increasing. Despite a wobbly economic outlook, the UK is still facing inflation pressures via rising wages, and the BoE could be forced to continue raising benchmark rates in the near term. The UK is already facing some of the highest interest rates in the G7, and continued rate hikes could threaten to tip the economy deeper into recession territory even as the BoE tries to plug the bleed from inflation.
The GBP/JPY is being helped by a receding Yen that is taking steps lower in the market as investors cool off after overextended risk appetite brought on by rate-bullish comments from the Bank of Japan (BoJ) recently. The BoJ’s Governor Kazuo Ueda hit newswires last weekend cautioning that the BoJ could be on pace to reverse their long-standing negative rate policy if economic data points to the Japanese central bank maintaining their 2% inflation target in a meaningful way.
Markets lurched on the news, sending the Yen clambering up the charts in the early week, but things are beginning to unwind. Japanese inflation, while currently holding above the BoJ’s desired level, is expected to slump in the coming months, and there are concerns the BoJ won’t be able to keep price growth at a healthy level heading into the end of the year.
GBP/JPY technical outlook
The Guppy hit a new daily high for the first time in over a month and is finding the 184.00 handle particularly sticky. The 100-hour Simple Moving Average (SMA) is threatening to turn bullish from 183.70, providing support as the 50-hour SMA consolidates and threatens to cross over into bullish territory. Higher lows on the hourly candles are also providing support from 182.80 to 183.20, while last week’s swing high point of 184.40 remains a key resistance area for the candles to overcome.
On the daily candlesticks, a descending minor trendline from late August’s high-water mark of 186.75 remains intact, and price action is getting squeezed by a rejection from the 50-day SMA near 183.00. If bids are able to congregate enough from this level, it will see a further leg up from the 50 SMA bounce, but further downside will see fresh challenges from the 100-day SMA currently parked near the 179.00 handle.
The Pound Sterling has consolidated against the Yen on a weekly basis for a month, with lows testing deeper waters, and with the GBP/JPY well-extended from 2023’s opening lows near 156.00, a downturn could see the pairing settle lower before long-term market forces re-establish the long-term bullish trend.
GBP/JPY daily chart
GBP/JPY technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD side-lines near 0.6200 as traders await US NFP report
AUD/USD consolidates near 0.6200 early Friday, just above its lowest level since October 2022 as traders move to the sidelines ahead of Friday's closely-watched US NFP data releae. Meanwhile, rising bets for an early RBA rate cut, China's economic woes and US-Sino trade war fears act as a headwind for the Aussie.
USD/JPY bulls turn cautious near multi-month peak ahead of US NFP
USD/JPY moves little following the release of household spending data from Japan and remains close to a multi-month top amid wavering BoJ rate hike expectations. Furthermore, the recent widening of the US-Japan yield differential, bolstered by the Fed's hawkish shift, undermines the lower-yielding JPY and acts as a tailwind for the currency pair amid a bullish USD.
Gold price consolidates below multi-week top; looks to US NFP for fresh impetus
Gold price enters a bullish consolidation phase below a four-week top touched on Thursday as bulls await the US NFP report before placing fresh bets. In the meantime, geopolitical risks, trade war fears and a weaker risk tone might continue to act as a tailwind for the safe-haven XAU/USD.
Ripple's XRP plunges over 4% following funding rates decline
Ripple's XRP declined 4% on Friday following a decline in its funding rates. The remittance-based token could decline to test the $2.17 support level if the crypto market decline extends.
How to trade NFP, one of the most volatile events Premium
NFP is the acronym for Nonfarm Payrolls, arguably the most important economic data release in the world. The indicator, which provides a comprehensive snapshot of the health of the US labor market, is typically published on the first Friday of each month.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.