Following the hawkish posture adopted by the Bank of England, pound traders are now focusing on the forthcoming November UK inflation data. The UK inflation rate continues to be higher than other prominent economies.
GBPJPY Bulls Await For the UK CPI
Although three Bank of England members voted in favor of an interest rate increase with the concern of declining services inflation, a slight decrease in underlying price pressures might not be enough to influence their judgments. It is improbable that this will result in substantial damage to the pound.
Nevertheless, the overnight index swap in the United Kingdom is pessimistic regarding the necessity for additional rate hikes, with approximately 115 basis points worth of rate cutbacks anticipated by December of next year.
The stagnation of the British economy in the third quarter may cause investors more concern than the persistence of inflation. November retail sales data for the United Kingdom, which is set to be released on Friday, will be analyzed attentively in light of this.
BoJ is Not Ready For A Positive Rate
As expected, the Bank of Japan maintained its ultra-loose policy settings in anticipation of additional data indicating whether wage and price increases would be sufficient to warrant a reduction in enormous monetary stimulus. Some traders were dismayed when the central bank maintained its dovish policy guidance in the absence of indications that negative interest rates would cease in the near future.
Karl Schamotta, chief market strategist at Corpay in Toronto, remarked that traders are retreating from anticipations that the Bank of Japan will move into positive interest rate territory at the beginning of the year. He observed that neither the press conference nor the statement contained any indication that policymakers are prepared to implement a significant increase in interest rates.
GBPJPY Technical Analysis
In the daily chart of GBP/JPY, the broader market direction is bullish, where the most recent fundamental-driven data provided a bullish continuation opportunity.
In the recent chart, the dynamic 50-day Exponential Moving Average is above the current price, which is the minor resistance. Moreover, the 200-day SMA works as a major support, which could be the major support level for this pair.
In this context, a bearish daily close below the 178.08 level could be an alarming sign to bulls. A downward pressure with consolidation could lower the price toward the 170.00 area.
On the other hand, an immediate bullish recovery with a daily candle above the 184.30 level could be a high probable trend trading opportunity. In that case, the next resistance level would be at the 188.65 level.
