GBP/JPY Rises to new 2023 peak for CAPITALCOM:GBPJPY by DaveBrascoFX

STRATEGY LONG

British Pound Sterling Japanese Yen traded at 171.115 this Friday April 28th, increasing 3.864 or 2.31 percent since the previous trading session. Looking back, over the last four weeks, GBPJPY gained 4.63 percent. Over the last 12 months, its price rose by 4.84 percent.

Larger bulls are likely to take a breather in coming sessions as 14-d momentum and RSI are at the border of overbought zone, suggesting that traders may collect some profits from three-day rally which accelerated on Friday.

Pullback should offer better buying opportunities, with extended dips expected to find support above 168.00 zone (broken Fibo 76.4% level at / former tops of Apr 19/25) to keep bulls in play.

Res: 170.00; 170.95; 172.11; 174.98.
Sup: 137.00; 168.36; 168.00; 167.18.

Note

I do think that we eventually break out above the highs, as interest rates around the world climbing works against the Japanese. Remember, the Bank of Japan continues to fight higher interest rates, by purchasing 10 year JGBs in the open market.

In order to do so, they need to print more currency, so that obviously has a major influence on what happens next. Ultimately, I think the Japanese yen will continue to see a lot of negativity, and therefore I think the markets will continue to look higher, although it will probably end up being very noisy to say the least along the way. Because of this, I’m looking for short-term pullbacks to take advantage of, so that I can find value in a market that has been so resilient and strong. The British pound of course continues to see a lot of inflows as inflation in the United Kingdom has been so strong, setting this up as a perfect scenario for a bullish market.

Note

The British pound has pulled back during the week, showing signs of hesitation at a previous high.

Note

The British pound has initially tried to rally during the trading session on Tuesday against the Japanese yen but has given back quite a bit of the gains to show signs of hesitation

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It is an important week ahead for the Pound. However, investors must wait until Thursday for the Bank of England’s monetary policy decision.

On Friday, the Q1 UK GDP Report will draw interest. Beyond the GDP numbers, manufacturing production and trade data will also influence.

While the economic indicators will influence, the monetary policy decision is the main event. Economists expect the BoE to hike interest rates by 25 basis points on Thursday, with a 7-2 vote in favor of a move.

An in-line-with-expectation move would leave the MPC meeting minutes and BoE Governor Andrew Bailey to move the dial. In March, the UK annual inflation rate stood at 10.1%, pressuring the BoE to deliver more aggressive moves to tame inflation. The BoE inflation, economic growth, and policy outlook will be focal points.

Other stats include BRC Retail Sales Monitor and house price figures that should have a limited impact on the Pound.

With the BoE in focus, investors should monitor BoE commentary. BoE Chief Economist Huw Pill is on the calendar to speak.

Note

GBP Funamentals

The GBP has experienced a notable rally in recent weeks, positioning it as the top-performing currency among the G10 nations this year. The unexpected success story of the GBP, now dubbed the "King of G10 FX," can be attributed to several factors.
Firstly, the rebound can be attributed to a series of positive UK data releases in recent months, which were influenced by the significant decline in European energy prices and subsequent improvements in commodity terms of trade. Additionally, the persistent UK inflation, combined with reduced post-Brexit tensions between the UK and the EU, as well as diminished risks of another independence referendum, have enhanced the attractiveness of GBP-denominated assets.

Note

GBP/JPY rebounds to 170.65, fueled by Yen’s weakness and the upcoming BoE decision.
GBP/JPY targets 171.00, eyeing a year-to-date high of 172.33 if momentum holds.
The GBP/JPY recovered some ground after falling to weekly lows of 169.85, climbing sharply above the 170.00 figure, as overall Japanese Yen (JPY) weakness, as the main reason, alongside the Bank of England (BoE) monetary policy decision lurking. The GBP/JPY is trading at 170.65, above its opening price by 0.14%.

Note

The GBP/JPY appears to have bounced from its weekly lows below the 170.00 figure but remains shy of testing the weekly high of 171.07. Given that a golden cross was witnessed in early April, the GBP/JPY bias is upward. Oscillators like the Relative Strength Index (RSI) indicator show buyers are gathering momentum. The 3-day Rate of Change (RoC) portrays its largest jump to the upside, suggesting that the GBP/JPY could re-test the year-to-date (YTD) high at 172.33.

But firstly, the GBP/JPY must reclaim the 171.00 mark. A breach of the latter would expose the 172.00 figure, followed by the YTD high.

However, further downside is warranted if GBP/JPY drops below 170.00. GBP/JPY’s first support would be the December 13 swing high-turned-support at 169.27. Once cleared, the next demand area would be the confluence of the 20-day EMA and the April 19 high, at around 168.20/167.97, respectively, immediately followed by the December 20 daily high at 167.01.

Note

Ueda leaves everything unchanged
“What he had to say was in no way positive for JPY, as he underlined that he would continue his predecessor’s ultra-expansionary monetary policy. The indicator of this is the yield curve control (YCC) which would probably be the first element to change in a possible exit scenario. However, Ueda rejected this kind of change. In other words: everything remains unchanged.”

“Tthe Yen is only likely to appreciate long-term if there is this early move away from current monetary policy. Otherwise, it will mean: If the BoJ waits for too long, the Yen might easily suffer despite increased (real) yields. Or inflation eases back below the BoJ’s target level (2%). At that point we would be back to square one, which means a move away from the ultra-expansionary monetary policy would be unlikely. Short, medium and long-term.”

“Anyone who has already read the IMF’s latest "World Economic Outlook" and who follows its view might come to the conclusion that after the current inflation shock has worn off real yields in the rest of the world will be back at low levels. Followers of that view might not be excessively JPY-pessimistic, as the real yield disadvantage of the Yen would be reasonably moderate in that case.”

Note

Ueda leaves everything unchanged
“What he had to say was in no way positive for JPY, as he underlined that he would continue his predecessor’s ultra-expansionary monetary policy. The indicator of this is the yield curve control (YCC) which would probably be the first element to change in a possible exit scenario. However, Ueda rejected this kind of change. In other words: everything remains unchanged.”

“Tthe Yen is only likely to appreciate long-term if there is this early move away from current monetary policy. Otherwise, it will mean: If the BoJ waits for too long, the Yen might easily suffer despite increased (real) yields. Or inflation eases back below the BoJ’s target level (2%). At that point we would be back to square one, which means a move away from the ultra-expansionary monetary policy would be unlikely. Short, medium and long-term.”

“Anyone who has already read the IMF’s latest "World Economic Outlook" and who follows its view might come to the conclusion that after the current inflation shock has worn off real yields in the rest of the world will be back at low levels. Followers of that view might not be excessively JPY-pessimistic, as the real yield disadvantage of the Yen would be reasonably moderate in that case.”

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