GBP/JPY rises for third consecutive day but overall bears remain in control
- GBP/JPY rises for third consecutive day but meets resistance and remains in a downtrend.
- Rising British and American yields help support the pair and limit the Yen’s strength.
- All eyes are now on NFP data from the US.
The GBP/JPY trades high for the third day in a row on Thursday, backed by rising British Gilt yields, due to higher interest rate expectations expecting to draw more capital inflows. This comes after the UK Debt Management Office sold bonds at a yield of 5.668%. The 2-year Gilt yield rose to 5.55%, its highest level since 2007, while the 5 and 10-year yields stand at 4.95% and 4.70%, respectively, more than 3% increases.
In the US, ADP’s hot employment figures fueled an increase of US Treasury yields which also limited the JPY advance.
In Friday's Asian session, investors will eye Labor Cash Earnings data from Japan for May, which are expected to decelerate to 0.7% YoY from the previous 1%. In addition, the focus will be Nonfarm Payrolls (NFP) from June in the US, which are expected to slip to 225K from the previous 339K. The outcome of the NFP figures may fuel volatility in the US bond market and hence affect the JPY and GBP’s price dynamics.
GBP/JPY Levels to watch
The cross is still poised for further downside on the daily chart. Technical indicators, specifically the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), show weakness, indicating that the bears are starting to take the lead.
On the downside, support levels for the cross line up at the daily low of 182.50, followed by the 182.00 zone and the 181.50 area. On the flip side, resistances to monitor line up at 183.50 and the cycle high at 184.00.
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Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
