GBP/JPY - Yield differential favors bears, focus on UK CPI
|- 10Y UK-Japan yield spread drops in GBP-negative manner.
- Focus on the UK CPI.
Having witnessed a bearish pin bar reversal in the last two trading days, the GBP/JPY is trading on the back foot in Asia.
As of writing, the pair is at 151.30 levels. Friday's pin bar candle and a bearish follow-through yesterday indicates the cross may have found a top at 153.41 and the pair could explore the downside towards 150.00 levels in the short-run.
Also, the yield differential, i.e. the difference between the 10-year UK and Japan bond yield fell to a three-month low of 115.1 basis points (bps) yesterday. The narrowing of the spread in the GBP-negative manner adds credence to the bearish view put forward by the pin bar candle.
Eyes UK CPI
The cost of living in the UK as represented by the consumer price index (CPI) is seen rising 3 percent y/y in November. The core inflation is seen rising 2.7 percent y/y. A higher inflation figure might help the GBP regain bid tone.
GBP/JPY Technical Levels
A move below 151.23 (previous day's low) could open up downside towards 150.00 (psychological level) and 149.76 (Dec. 12 low). On the higher side, breach of the hurdle at 151.60 (session high) could yield a rally to 151.94 (Nov. 1 high) and 152.48 (Dec. 1 high).
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