Market news

19 September 2023

GBP/JPY falling back to 183.00 as markets await BoE, Japan Trade Balance

  • The GBP/JPY couldn't maintain a bullish push, and is falling back to the midrange.
  • Investors appear unwilling to dedicate to a direction as the BoE comes in for a landing.
  • Japan trade balance figures could kick off JPY momentum for the Wednesday session.

The GBP/JPY is retesting the 183.00 handle after failing to recapture the 183.50 level in Tuesday trading.

The Pound Sterling (GBP) is trading softly in Tuesday markets, lacking momentum as investors largely sit on the sidelines ahead of this week’s central bank showings.

Japan trade balance up first, BoE in the barrel

Late Tuesday will see trade balance figures for Japan, due at 23:50 GMT. Exports and imports are both expected to decline, -1.7% and -19.4% respectively, and the overall Merchandise Trade Balance is forecast to decline ¥-659.1B.

Inflation data is inbound on Wednesday for the United Kingdom (UK), with the Consumer Price Index (CPI) headline for the month of August forecast to tick upwards to 0.7% from the previous month’s 0.4% decline.

The inflation read will serve as a precursor to the Bank of England’s (BoE) showing on Thursday, which is expected to raise rates to 5.5%, a 25-basis-point increase from 5.25%.

Inflation continues to plague the UK even as the British economy continues to wobble, and investors will be keeping a close eye on both inflation figures and the BoE’s Monetary Policy Summary.

The BoE’s rate call and following statement kick off at Thursday at 11:00 GMT.

Friday to close out the week with BoJ, UK retail figures

Friday brings the Bank of Japan’s (BoJ) own interest rate showing, which is broadly expected to maintain their -0.1% negative rate stance. Recent comments from BoJ officials teasing about the possible end of the negative rate regime pushed investors into the bullish camp, but the positioning may have been premature.

Japanese government officials were quick to head off the statements at the pass, noting that BoJ rate hikes would only come if the BoJ were able to hold interest rates above the 2% target mark, a goal that may prove illusory for the BoJ as inflation is expected to slump in Japan.

Friday will also close out the week with Retail Sales figures for the UK. Retail sales figures are forecast to gain 0.5% in August after the previous month’s -1.2% decline.

GBP/JPY technical outlook

The Guppy saw a tidy rejection from the 200-hour Simple Moving Average (SMA) in Tuesday trading, sending the pair back into the 183.50 handle after failing to capture 183.50.

Lower highs continue to plague the hourly candlesticks, and the bearish pattern from late August’s high of 186.77 remains intact.

On daily candlesticks the GBP/JPY is struggling to develop momentum, with the pair struggling to make space for itself away from the 34-day Exponential Moving Average (EMA). The 50-day SMA is currently climbing steadily into the 180.00 major psychological handle, and bidders will be looking to keep the pair afloat.

The Guppy has closed in the green for seven of the past eight months, leaving the pair incredibly overbought and exposed to downside shocks if the rug gets pulled out from beneath GBP bulls.

GBP/JPY daily chart

GBP/JPY technical levels


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