GBP/JPY knocking on the bottom of 183.75 on dovish BoE Gov Bailey

The GBP/JPY pairing is on the downside as the Pound Sterling (GBP) stumbles on comments from the Bank of England (BoE) Governor Andrew Bailey suggesting the rate hike cycle could be nearing its end. It’s been up-and-down action for the Guppy chart as the GBP struggles to find a foothold against the Yen (JPY). The week’s early near 185.75 couldn’t hold and now the pair is swamped near the bottom of a three-week channel near the 183.50 level.

Dovish BoE saps Pound Sterling momentum, sends GBP lower

BoE Governor Bailey hit the wires early Thursday with dovish comments about the BoE rate hike cycle, implying September’s rate call could see the end of interest rate increases from the United Kingdom’s central bank. Policymaker Swati Dhingra also hit the airwaves, echoing Governor Bailey’s dovish rate sentiment.

Japan GDP figures are on the docket, mild contraction expected

It's a data-light week for the GBP, and JPY traders will be keeping an eye out for Japanese Gross Domestic Product (GDP) figures due during Tokyo’s Friday market session. Japan’s GDP grew by 1.5% during the first quarter of 2023, and Q2 GDP is expected to show a minor reduction in the headline figure to 1.3%.

Technical outlook 

The GBP/JPY sees contracting resistance from late August’s peak near 186.75, with lower highs tapping out a descending trendline. The near-term floor has been priced in near 183.60, and 4-hour chart technical indicators are beginning to flash oversold conditions. 

On the daily candles, 184.00 is developing into a significant level for the Guppy, and while the overall trend remains decidedly bullish from the year’s lows near 156.00, upside momentum has been evaporating steadily. Bearish momentum from this level will see the GBP/JPY running into support from the 180.00 to 181.00 region.

GBP/JPY, 4-hour chart