GBPJPY Technical Analysis – Key trendline in focus

UK:

• The BoE hiked by 25 bps as expected at the last
  meeting.
• The central bank seems to be leaning
  more on the less hawkish side as a key line in the statement was tweaked to
  indicate the propensity for a “high for longer” stance rather than keeping with
  additional rate hikes.
• Key economic data like the latest employment report showed a very high wage growth
  despite the rising unemployment rate, and the UK CPI beat expectations the last time pointing to a
  stagflation.
• The UK PMIs recently missed expectations across the board
  with the Services sector plunging into contraction.
• The market expects the BoE to hike
  by 25 bps at the upcoming meeting.

Japan:

• The BoJ kept everything unchanged as expected at the last meeting but
  tweaked the YCC policy keeping the target band unchanged but giving more
  flexibility with a hard cap at 1.00%.
• The Japanese CPI data surprised to the upside
  recently with the core-core reading reaching again the previous high.
• The Unemployment Rate surprisingly jumped to 2.7%
  recently, although it remains near cycle lows.
• BoJ Governor Ueda over the weekend said that his
  focus is on a quiet exit from the monetary easing and added that the BoJ should
  have enough data by year end to decide how to proceed.
• The Japanese wage data last week showed a slowing in wage
  growth, and this is something the BoJ focuses on particularly.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the last leg
higher in GBPJPY was diverging with the
MACD, which
is usually a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we got a pullback into the key trendline around
the 182.50 level where the buyers stepped in with a defined risk below the
trendline to position for another rally into a new high. A break below the
trendline would open the door for a selloff into the 176.32 swing low level.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we had also
the confluence with the
38.2% Fibonacci retracement level
around the trendline, so the buyers had a very good support level
there. The recent bounce is not yet indicative of a resumption of the uptrend
as the price has not yet made a new higher high. The moving averages though
have crossed to the upside again, so that might be an early sign of an incoming
uptrend.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price was diverging with the MACD right when it fell into the trendline and the
38.2% Fibonacci retracement level. That was another confirmation for the buyers
that a reversal might be in the cards. The price will need to break above the
recent swing high around the 184.50 level to change the market structure into
an uptrend and give the buyers back control. The sellers, on the other hand,
will want to wait for the price to break through the major trendline to pile in
and target the 176.32 level.

Upcoming Events

This week we have many important events. Today is the US
CPI Day, which is expected to show an increase in headline inflation due to
higher energy prices but further disinflation in the core measure. Tomorrow, we
will see the latest US Jobless Claims, PPI and Retail Sales data. Finally on
Friday, we get the University of Michigan Consumer Sentiment report. Strong
data is likely to boost global yields and send the GBPJPY higher, while weak
readings should have the opposite effect.