GBP/JPY Price Prediction: Cable Jumps Over 150 Pips With Room for Another Squeeze Higher
- GBP/JPY saw decent gains on Wednesday, receiving a helping hand from Brexit and BOJ fundamentals.
- Brexit optimism helps GBP higher, while BOJ remain dovish, adding pressure to JPY.
GBP/JPY jumped to its highest levels seen since 14th December 2018. The session high print was observed at 143.56, with the pair having gained over 150 pips. In terms of the reasoning, it was heavily attributed to fundamental factors, both for Britain and Japan.
Bank of Japan Dovish Tone
In the very early hours of European trading, the Bank of Japan (BOJ) released its monetary policy decision. As anticipated, the central bank maintained much of a dovish tone to its rhetoric. Policymakers slashed their inflation forecasts, while maintaining their huge stimulus programme. Governor Haruhiko Kuroda noted strong and growing risks to the economy, including trade protectionism and faltering global demand.
The BOJ added that, “Such downside risks concerning overseas economies are likely to be heightening recently, and it also is necessary to pay close attention to their impact on firms’ and households’ sentiment in Japan,”
As such, there were no changes made to monetary policy this time round. It is likely going to be a challenge for the Bank of Japan to discuss policy normalization or even an exit strategy for the moment, given as they themselves highlight that global economic risks are rising. This tone added to the broad JPY weakness observed across the board.
Renewed Brexit Optimism
The rally seen for GBP today was sparked following the Labour Party publicly saying they will back a postponement proposal. This essentially could hold off any decision on Brexit until the end of the year, extending Article 50. Elsewhere, the European Commission commented on the news wires, noting they will do their best to avoid a hard border in Ireland.
These fundamental developments were huge drivers in the aggressive move north for GBP/JPY. The Brexit news as detailed was supportive for the pound, whereas the BOJ commentary was largely digested as a JPY negative.
Technical Review – GBPJPY
Upside momentum looks set to maintain it course. With that in mind, it is worth knowing the next major barriers for the bulls. Looking via the daily chart view, the next area of resistance is not seen until 143.95. This was the 13th December high, which would be closely watched, as it could produce a double top formation. If the bulls have enough steam behind their run higher to breakthrough, then eyes will be on 145.50.
In terms of the 60-minute chart view, price action is supported by an ascending hourly trend line. This has been running since the early hours of trading on 22nd January. A failure of this holding could see a drop back down to 142.20, hourly support. Further south, if selling pressure picks up pace, then a demand zone can be seen down at 140.80-50 range.
To conclude, the bias remains bullish near-term for a decent run up a the 13th December high area, 143.95. Longs may be off the cards if the hourly ascending trend line is breached, but this remains intact at the time of writing.
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