- GBP/JPY closes a four-consecutive week of gains soaring to its highest level since February 2016.
- BoJ is expected to stick with yield curve control.
- Yield divergence between gilts and Japanese bonds favours the GBP.
GBP/JPY has soared to its highest level since February 2016, closing a four-consecutive week of gains. This surge comes in the wake of a dovish stance taken by the Bank of Japan (BOJ), which is expected to stick with its yield curve control policy to keep long-term interest rates low. The yield divergence between UK gilts and Japanese bonds has further favoured the British pound adding to the momentum of the GBP/JPY pair.
BoJ dovish stance weight on the Yen
Bank of Japan (BoJ) officials, acknowledged that inflation has surpassed initial projections, which may result in upward revisions to the bank's inflation forecasts in the upcoming macroeconomic assessments. Despite this, the BoJ maintains a cautious stance and does not express confidence in achieving the sustainable 2% inflation target. Consequently, policymakers emphasize the ongoing need for continued monetary stimulus to support and stabilize the prevailing economic conditions.
On the other hand, rising yields amid the expectations of a rate hike from 4.5% to 4.75% on June 22 by the Bank of England (BoE) seems to be responsible for the GBP/JPY upwards momentum. In that sense, the British yields increased across the board with the 2.5-year yields seeing more than 1% increases on the session.
GBP/JPY levels to watch
Both the weekly and daily charts suggest that the bulls are clearly in charge of the short term. Specifically, on the daily chart, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both showing strength standing in positive territory, and the pair trades above its main moving averages indicating that the buyers are in control.
In case the GBP/JPY continues to gain traction, the following resistance line up at the 175.50 zone followed then by the 176.00 zone and the 176.30 level. On the other hand, in case of a technical correction, support levels line up at the 174.40 zone and below the psychological mark at 174.00 and the 20-day Simple Moving Average (SMA) at 172.90.
GBP/JPY daily chart
-638219292947521257.png)
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: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.