GBP/JPY bulls are on the move early doors, eyes on central bank divergences

• GBP/JPY bulls tinkering with bearish commitments below 155 the figure. 
• BoE and BoJ views on currency value is a theme. 

GBP/JPY has been making gains at the open this week with the yen on the backfoot. At the time of writing, the cross is 0.22% higher and is moving in on the end of last week's European highs near 115 the figure. The high today, so far, has been 154.82. 

The move in the cross has stood out considering the lack of action elsewhere. However, there is plenty of meanwhile resistance across the hourly time frame and a lack of volume in this Lunar New Year market conditions. 

Nevertheless, the week will pick up on the calendar elsewhere and Russia/Ukraine tensions will keep traders on their toes. However, far more fundamental to sterling will be the Bank of England this week. ''The economy has proven to be in better shape — and inflation much higher — than the MPC expected at its recent meetings, and we expect a rate hike on worries about rising inflation expectations,'' analysts at TD Securities explained.

''This year's growth forecast will be revised down, but inflation sharply upward over this year and next. Longer-term projections may remain roughly unchanged despite higher yields.''

Meanwhile, money markets are very close to pricing a 25bp BoE rate hike at Thursday’s meeting which is likely supporting GBP crosses at the open n Monday, much to the central bank's pleasure as it seeks to cap inflation. 

Aas for the Bank of Japan, the board members there have been commenting around the value of their own currency of late. Last week, the BoJ Governor Kuroda downplayed what concerns there might be at the bank over JPY weakness. Kuroda stated that a little JPY weakness was good for the economy. This gives the market the green light to short the yen and the divergence between the BoE and BoJ could playout for the bulls in the coming days. 

In this regard, US yields will also be a focus. The US 10-year yield has started to show signs of robustness on the daily chart, supported by the 10-EMA. Should global equities and yields pick up, the yen bulls could find themselves on the wrong side of the market.

and that commodity prices, not JPY weakness, was more relevant for inflation. Clearly, there is no panic in Tokyo over USD/JPY back near 116. And we suspect that it would take a fast move to 120 to trigger a little more concern. 

GBP/JPY technical analysis

The price is testing critical hourly resistance near 1.5490  that could give way to a fast run to 155.20 in the coming hours if broken. Thereafter, 155.50 will be eyed as old support.