GBP/JPY: Ahead of central banks meetings and afterwards
On Wednesday, the focus of market participants will be the publication (at 19:00 GMT) of the Federal Reserve’s interest rate decision. Tomorrow, the central banks of Japan and the UK will hold their monetary policy meetings.
The first of these will be the Bank of Japan. Most economists believe that the Japanese economy will maintain a moderate pace of recovery. As Bank of Japan Governor Kazuo Ueda recently stated, the economy is moving towards stable inflation, driven by stable wages, which, in turn, will lead to price increases, but the country’s monetary authorities will manage to keep the consumer price index around the target of 2.0%. In the meantime, the Bank of Japan is widely expected to leave the interest rate unchanged. Expectations that Japanese consumer prices will remain above the 2% target, along with a modestly expanding economy and wages rising at the fastest pace since November 1992, give the Bank of Japan another reason to raise interest rates, economists say.
In addition, BOJ Governor Kazuo Ueda recently said the time for the next rate hike is approaching.
So investors in the yen, including against the dollar and pound, will likely want to take a wait-and-see approach ahead of the Fed, BOJ and BOE meetings. Uncertainty remains high, though.
On the eve of tomorrow's meetings of the Bank of Japan and the Bank of England, the GBP/JPY pair is developing an upward trend, trading in the long-term bull market zone - above the key support levels of 180.00, 174.90 and the medium-term - above the key support levels of 193.95, 193.00.
At the same time, technical indicators on the daily and weekly charts are also on the buyers' side.
A breakout of local resistance near the marks of 195.80, 196.00 will in this case be the first signal for new long positions.
An alternative scenario will be associated with a breakout of today's minimum of 194.68 and a downward correction to the support zone at the levels of 194.00, 193.95. Long positions are preferable for now.
Author
Yuri Papshev
Independent Analyst
Independent trader and analyst at Forex market. Trade experience - more than 10 years. In trade Yuri Papshev uses a combination of fundamental and technical analysis.
