GBP/JPY edges into six-week high on approach to 190.00

The GBP/JPY found fresh chart paper on the high side towards the 190.00 major handle, climbing over a full percent on the day as the Pound Sterling (GBP) catches a lift against the beleaguered Japanese Yen (JPY) after a better-than-expected print in the UK’s Consumer Price Index (CPI) inflation. 

UK CPI inflation printed better than markets expected early Wednesday, showing MoM CPI in December climbed 0.4%, double the median market forecast of 0.2% and eating away at the previous period’s downside print of -0.2%. With inflation stickier than investors expected, odds of the Bank of England (BoE) kicking off a round of rate cuts are vanishing into the ether, pulling down risk assets and sending the GBPbroadly higher on repatriation flows.

The UK Retail Price Index in December also rose 0.5% versus the forecast 0.4% and previous -0.1%, adding to rate-hungry investors’ chagrin.

The Bank of Japan (BoJ) remains firmly committed to a hyper-easy monetary policy stance, and the BoJ is determined to continue dragging the Yen under the bow as policymakers at the Japanese central bank fear a possible decline in inflation below the BoJ’s 2% target sometime in the future.

Figures on Japanese Machinery Orders in November are expected early in Thursday’s Asia market session, with MoM Machinery Orders expected to decline 0.8% compared to October’s 0.7% growth. The annualized YoY Machinery Orders through November are expected to recover from the previous period’s -2.2% to 0.2% as near-term declines enter the data series from the near end.

GBP traders will get one more crack at the data calendar on Friday when UK Retail sales figures for December print, and median market forecasts are calling for a MoM print of -0.5% (last 1.3%) and a YoY print of 1.1% (previous 0.1%) for the year through December.

GBP/JPY Technical Outlook

The GBP/JPY’s recent rise through the 186.00 handle has the pair set for a challenge of 189.00 if selling pressure doesn’t set in to bring the pair back down to the median. In the near-time, average prices are far below current price action with the 200-hour Simple Moving Average (SMA) lagging momentum back at 185.00, and it’ll take a 1.6% decline from current bids to bring the pair back in-line with the median.

The GBP/JPY remains well-bid on daily candlesticks, continuing to push higher after January’s early rebound from the 200-day SMA near 180.00. Continued bullish momentum will see the pair making multi-year highs above 188.66, while the downside is capped off by a technical floor at the 50-day SMA near 184.00.

GBP/JPY Hourly Chart

GBP/JPY Daily Chart

GBP/JPY Technical Levels