- GBP/JPY's daily chart shows a bear cross of major simple moving averages.
- BOJ is unlikely to cut rates or expand asset purchases.
- UK's Retail Sales are forecasted to have tanked by 14% in April.
GBP/JPY's long-term simple moving averages (SMA) have crossed bearishly in the run-up to the Bank of Japan's emergency meeting and key data release in the UK.
The pair's 100-day SMA has dropped below the 200-day SMA. This is the first bear cross of the long-term SMAs since June 2018. Many traders consider it as an advance warning of a big sell-off. However, more often than not, it traps sellers on the wrong side of the market. After SMAs are based on past data and tend to lag prices.
Focus on BOJ meeting
The BOJ will hold an emergence policy meeting on Friday to discuss support measures for financial institutions that boost lending to small firms hit by the coronavirus outbreak.
The emergency meeting comes on the heels of the recent data, which showed Japan’s economy slipped into a recession last quarter. The central bank is already running a bond purchase program since 2013. Further, rates have been set below zero for almost four years now. The IMF has warned against further reductions in interest rates and called for fiscal stimulus.
The central bank is unlikely to announce expansion of its asset purchase program or a rate cut on Friday and is likely to deliver credit easing measures, which will help facilitate corporate financing.
As such, the event may have little or no impact on the USD/JPY pair. The yen, however, may come under pressure if the bank expands monetary easing.
Eyes UK retail sales
The data due at 06:00 GMT is expected to show that consumer spending, as represented by Retail Sales, tanked by 15% in April, following March's 5.1% decline. A weaker-than-expected reading will likely bolster the case for negative rates in the UK and send the GBP lower.
GBP/JPY is currently trading at 131.77, having found bids 131.40 in early Asia. The pair has failed to take out the 50-day average hurdle multiple times in the last three weeks. That average hurdle is located at 132.35 at press time.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.