GBP/JPY: a test of the daily channel's resistance premature but justified considering Brexit and labour data

• GBP/JPY is flying high on Tuesday and right up to test R3 located at 148.44, (148.48 is the session high so far).
•  The cross has rallied from a European low of 147.43 and penetrated the 200-hr SMA as London traders got going with USD/JPY getting over the 112 line. 

Sterling has had some supporting factors sewn into the price action today. First of all, this morning’s release of the latest UK labour report was very encouraging, and the detail has vindicated the BoE who have warned that wage inflation is on the way - concerning the better tone of the UK's average weekly earnings. 

Also, the unemployment rate remains at 4% - the lowest level since the mid-1970s. All sterling needs now is some positive headway and real clarity in Brexit negotiations, and you can bet your bottom penny that sterling will pole vault its way to the 1.35 round knock out option figure in a flash with 1.3650 19th September highs on the radar. 

A more pessimistic view

Analysts at ING bank argued that the fact that jobs growth has been more or less flat - and even marginally negative in this latest report could suggest firms are beginning to take a more widespread wait-and-see approach to hiring decisions."

"It's probably too early to know for sure, but even if the jobs numbers do hold up, there is still a risk that consumers begin to get more cautious if increased Brexit warnings from businesses see individuals start to reassess their job security. This, coupled with the fact that real incomes are still being squeezed to some extent by the recent petrol price rises, suggests spending could come under further pressure over the winter, and overall growth momentum could ease. So despite the better wage growth figures - that might otherwise see the Bank of England accelerate its tightening plans - we don't expect policymakers to raise interest rates until May 2019 at the earliest."

GBP/JPY levels

However, should sentiment be then geared towards a rate hike from the BoE, be it this year or next, 1.4000 will be a realistic target as the BoE will be seen as perhaps, the new safer haven currency considering its long history of a safe bet and also considering the BoE's confluence with the Fed. Then, when all combined, when stripping out some of the Brexit risks from the Yen, you can easily see where GBP/JPY would be destined to go as well - On a bust through the top of the 2018 channel's resistance, 153.20 guards 156.62 2018 highs. However, while there are still plenty of pitfalls concerning Brexit, S3 is located down at 145.70 and 144.99 marks the 1st March lows guarding 143.20.