GBP/JPY plunges below 150.00 handle post-BoE, Carney in focus

Haresh Menghani FXStreet

• Plummets over 100-pips on dovish BoE hike.
• BoE inflation report foresees inflation peaking in October 2017.
• Two rate hikes seen over 2-years, to bring inflation back to target.

The GBP/JPY cross faded a knee-jerk bullish spike to mid-151.00s and tumbled below the key 150.00 psychological mark post-BoE decision.

The British Pound came under some intense selling pressure after the BoE's quarterly inflation report showed that the MPC now sees inflation peaking at just over 3% in October 2017 and two more hikes seen over the forecast horizon of two-years, to bring inflation back to target.

• BoE interest rate decision: MPC stands ready to respond to changes in the economic outlook

The market participants assessed the report as dovish and a clear signal that today's rate hike, for the first time in 10-years, is not the beginning of a tightening cycle. The central bank took back an emergency cut, announced after the Brexit vote in August 2016, and raised interest rates by 25-bps to 0.50%.

With today's sharp downslide, the cross erased majority of its strong weekly gains and which might now be seen as the first sign of a possible bearish reversal.

Currently trading around the 149.85-80 region, recovering over 50-pips from session lows, traders now look forward to the BoE Governor Mark Carney's post-meeting pressure for some fresh impetus.

• BoE interest rate decision and Mark Carney’s speech – Live

Technical levels to watch

A follow through weakness below 149.25 level (BoE swing low) is likely to accelerate the fall towards the 148.00 handle before the cross eventually aims towards testing 147.30-20 strong horizontal support.

On the upside, sustained recovery back above the 150.00 handle might trigger a short-covering bounce towards the 150.80-85 supply zone, which if cleared could pave the way for an extension of the pair's upward trajectory.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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