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GBP/JPY Surges Past 20-Day SMA Amid Anticipated BoJ Dovishness

GBP/JPY, the popular currency pair, witnessed a significant upward trajectory, bypassing the 20-day Simple Moving Average (SMA) and reaching a daily peak of 182.58. The surge effectively wiped out the losses accrued over the week. According to a Reuters report, the Bank of Japan (BoJ) will likely retain its Yield Curve Control (YCC) policy during the forthcoming meeting, a sentiment that fueled the yen’s depreciation. Simultaneously, the pound capitalized on the robust June Retail Sales data from the UK.

The GBP/JPY pair experienced a more than 1% increase on Friday, soaring beyond the 20-day SMA and demonstrating a bullish outlook for the week’s close. The Japanese Yen took a hit, weighed down by the market’s dovish expectations for the upcoming BoJ meeting, while the British Pound enjoyed a boost from impressive Retail Sales figures.

UK’s Retail Sales data for June exceeded market projections, with the headline figure registering at 0.7% MoM, outpacing the anticipated 0.2% improvement from May’s 0.1% reading. This data offered substantial backing for the British currency.

When it comes to the Bank of England’s (BoE) future approach, market predictions highlight a reduced 45% likelihood of a 50 basis point rate hike after Wednesday’s lukewarm inflation data. Market participants now anticipate 25 basis point rate increases in September, November, and February 2024, bringing the final rate to 5.75%, a downward revision from last week’s prediction of 6.5%.

On the other hand, Japan’s June inflation data reflected a drop in the National Consumer Price Index (CPI) to 3.3% YoY, falling short of the 3.5% prediction. However, the Core measure remained steady at an as-expected 4.2% YoY.

As per a Reuters report, the BoJ is poised to keep its YCC policy intact in its next week’s meeting. The bank acknowledges the inflation uptick but remains vigilant about its sustainability. The policy divergence between the BoE and the BoJ continues to exert downward pressure on the JPY.

Technical Perspective on GBP/JPY:

The daily chart suggests a neutral-to-bullish short-term perspective. Indicators demonstrate resilience as the Relative Strength Index (RSI) has surged past the midpoint, indicating a bullish tilt. Concurrently, the Moving Average Convergence Divergence (MACD) records subtle red bars, signaling an ebbing selling pressure. In the grand scheme of things, the pair remains strongly positioned above the 100-day and 200-day SMAs, suggesting that the bulls are in command.

Resistance levels are observed at 182.60, 183.00, and 184.00, while support is found at 180.00, 179.50, and 179.00.

GBP/JPY Daily Chart: