The GBP/JPY traded in a narrow range between 188.22 and 1892.87 for the past four days. It hit an intraday low of 188.57 and is currently trading around 189.04. Intraday trend is bearish as long as resistance support 190 holds.
The Bank of Japan (BoJ) has turned aggressive, increasing its policy rate to 0.5% in January 2025, a 17-year high, due to wage inflation and inflation. The BoJ's revised inflation expectation is that core inflation will be above 2% until FY 2026, which is a sign of impending rate hikes.
Future increases are anticipated should economic conditions be as estimated by the BoJ, with markets factoring in at least another increase in 2025. This sort of hawkish stance is likely to strengthen the yen as it draws foreign funds.
Aside from that, BoJ policy would improve demand for U.S. corporate debt on cheaper hedging costs for Japanese investors. As a whole, the BoJ seeks to maintain inflation under wraps and normalize monetary policy, and this can affect domestic and world financial markets.
Technical Analysis Points to Further Downside
The GBP/JPY pair is trading below 34 and 55 EMA (Short-term) and 200 EMA (long-term) on the 4-hour chart, confirming a bearish trend. Immediate resistance is at 189.65, a breach above this level targets of 190/190.64/191/192. Any close above 192 in 4the -hour chart confirms further bullishness. Downside support is at 188 with additional levels at 187.25/186/185.
Market Indicators
CCI (50)- Bearish
Directional movement index - Neutral.
It is recommended to sell on rallies around 189.18-20 with a stop-loss at 190 for a TP of 187/185.
