GBP/JPY creates a double-bottom amid UK inflation, BOJ speculation
|- The GBP/JPY fell to lower ground, bouncing at the same point it fell to last week.
- Higher UK inflation had a limited positive effect while uncertainty about the next Governor of the BOJ was a significant mover for the yen.
- The technical picture leans lower.
The GBP/JPY is trading above 149 after reaching a session low of 148.95, very close to the previous low of 148.90, thus creating a double-bottom.
Global stock markets are not playing a significant role in moving currencies, different from their leading role in the past few days. Shares are stable in US trading.
In the UK, inflation came out at 3% y/y, above 2.9% that was expected. Core CPI also exceeded early forecasts by rising 2.7% y/y. The Bank of England had already forecast high levels of price rises last week, thus limiting the impact of the inflation data.
In Japan, Prime Minister Shinzo Abe did not commit to reappointing BOJ Governor Haruhiko Kuroda to a second term. Kuroda enacted a very dovish policy with the QQE program. Another Governor at the helm may oversee a more hawkish policy. The speculation pushed the yen to higher ground across the board.
GBP/JPY technical analysis: leans lower
The 148.90 level is now an even more critical support line after holding the cross on two separate occasions. Further below, the round number of 147 is also a double-bottom after supporting the pair twice: in October and November. Even lower, 145.20 was a stepping stone as the pair was rising in September.
Looking up, 150.25 cushioned the pair in January and is the immediate resistance line above the round number of 150. Further above, the swing low at 152 seen in late January is another cap. Another round number, 154, was a swing high in early February.
Other technical indicators lean lower. Momentum points to the downside in the past three days. The RSI is well below 50 and still above 30, avoiding oversold territory for now. The pair is below the 50-day SMA but above the 200-day SMA and this is already more mixed.
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