GBP/JPY: cross trades lower after central bank combo

The GBPJPY cross was half a percent weaker on Thursday, undermined mainly by the falling USDJPY pair.

Earlier in the day, the Bank of Japan maintained all policy settings as expected with rates kept at -0.10% and 10-year JGB yield target at around 0%, while it maintained forward guidance to keep current extremely low rates for an extended period at least through Spring 2020. It also signaled it could add stimulus as early as next month but some traders had expected a move on Thursday after the Fed’s rate cut. The yen strengthened afterward and the USDJPY pair fell circa 50 pips.

During the EU session, the Bank of England unanimously left monetary policy unchanged and the main rate was kept at 0.75% while warning again that uncertainty surrounding Brexit may weaken inflation forcing more easing in the future.

Moreover, the BoE's GDP expectations remain optimistic and the Q3 growth is expected at 0.2% (previously 0.3%) and the central bank also expects inflation to remain below the 2% target for some time. 

Technically speaking, the support for the cross could be located at previous lows of 134.00 and if not held, the short-term outlook might change back to bearish. The next target for bears could be at 132.00.

Alternatively, the resistance seems to be near 135.00 and afterward at the current cycle highs of 135.50. The price needs to rise above these levels to confirm the medium-term uptrend.