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4 Sep 2023

GBP/JPY recovers the 20-day SMA, no signs of BoJ pivot

  • GBP/JPY jumped to 185.00, seeing nearly 0.50% daily gains, recovering the 20-day SMA.
  • BoE tightening expectations remain steady, and BoJ will likely maintain its dovish outlook.
  • Monetary policy divergences drive the pair upwards.


At the start of the week, the GBP/JPY cross jumped towards 185.00 and recovered the 20-day Simple Moving Average (SMA) of 184.60. No relevant economic data will be released on the session for either country, and monetary policy divergences favour the GBP over the JPY.

On the Pound’s side, the UK will have a quiet week, with the final revisions of PMIs on Tuesday being the only highlight. As for now, World Interest Rates Probabilities (WIRP) shows that market participants are discounting higher odds of the Bank of England (BoE) increasing rates by an additional 0.50% of tightening beyond the December meeting, resulting in a total increase to the 5.75%- 6% range. In line with that, the expectations of a more aggressive BoE may limit the GBP’s losses against its rivals.

On the other hand, the BoJ's recent statements underline their commitment to aligning monetary policy with local wage and inflation trends. In that sense, Japan will report household spending figures from July on Tuesday and cash earnings data from July on Friday, which will give further insights to market participants and the BoJ into the current situation of the Japanese economy. Unless the bank does not see the required wage growth, it will likely maintain its dovish approach, leaving the JPY vulnerable.

 GBP/JPY Levels to watch 

 The technical analysis of the daily chart suggests a neutral to bullish stance for GBP/JPY as the bulls work on recovering their ground. The Relative Strength Index (RSI) exhibits a bullish inclination with a positive slope above the 50 threshold, while the Moving Average Convergence (MACD) prints weaker red bars. Additionally, the pair is above the 20,100,200-day Simple Moving Average (SMA), pointing towards the prevailing strength of the bulls in the larger context.

 Support levels: 183.50, 183.00, 182.00.

 Resistance levels: 185.00, 186.00, 187.00.

 GBP/JPY Daily Chart

 

 

 

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