GBP/JPY is fast approaching a key support zone!
Can the pair extend its uptrend despite a bearish U.K. data release?
Before moving on, ICYMI, yesterday’s watchlist checked out GBP/USD’s potential range breakout ahead of the U.S. CPI release. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Index provider MSCI announced the removal of 66 Chinese companies from the MSCI China Index and 76 from the MSCI China All Shares Index, adding to risks for China’s markets
In an interview, ECB Chief Economist Philip Lane shared that the Governing Council thinks that “we have some time left” and that “the next move is to cut interest rates, but the exact timing depends on the data”
OPEC’s monthly report retained the bullish assumption that global demand will rise by 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025
U.S. January inflation data contradicted the disinflation narrative: Annual CPI: 3.1% y/y (2.9% forecast, 3.4% previous); Monthly CPI: 0.3% m/m (0.2% forecast, 0.3% previous); Core CPI: 0.4% m/m (0.3% forecast and previous)
New Zealand’s food price index accelerated from -0.1% m/m to 0.9% m/m in January
Japan’s Vice Finance Minister for International Affairs Masato Kanda tried to talk down the yen after USD/JPY hit 150. He said that “Some of the recent rapid moves are in line with fundamentals, but some are clearly speculative. I think the latter aren’t desirable,” adding that “Authorities are ready to respond 24 hours a day, 365 days a year”
U.K.’s inflation came in sticky high but still weaker than expected in January: Headline CPI remained at 4.0% y/y (4.1% expected) while core CPI steadied at 5.1% (5.2% expected); PPI input is down 0.8% m/m (0.1% expected, -0.4% previous); PPI output is down 0.2% m/m as expected (-0.5% previous)
Price Action News
Overlay of GBP vs. Major Currencies Chart by TradingView
In case you missed it, the U.K. just published its January inflation numbers, and the markets seem to think it brings Bank of England (BOE) rate cuts back on the table. The U.K.’s headline and core CPI maintained their 4.0% and 5.1% annual rates respectively, which are slightly below market estimates.
The “softer” inflation reads, while still double the BOE’s targets, convinced enough traders to put rate cut bets back on the table. GBP dropped across the board at the news!
The British pound is currently trading in the red, with the heaviest losses seen against AUD and NZD and the least losses registered against fellow European currencies like EUR and CHF.
Upcoming Potential Catalysts on the Economic Calendar:
Euro Area’s flash GDP report at 10:00 am GMT
Euro Area’s flash employment change at 10:00 am GMT
Euro Area’s industrial production at 10:00 am GMT
BOE Gov. Bailey to give a speech at 3:00 pm GMT
U.S. crude oil inventories at 3:30 pm GMT
RBA Gov. Bullock to give a speech at 10:00 am GMT
Japan’s preliminary GDP at 11:50 pm GMT
Australia’s MI inflation gauge at 12:00 am GMT (Feb 15)
Australia’s jobs data at 12:30 am GMT (Feb 15)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
GBP/JPY: 15-min
GBP/JPY 15-min Forex Chart by TradingView
GBP’s weakness didn’t spare GBP/JPY, which is trading below the 189.00 psychological handle after consolidating above 190.50 earlier today.
It didn’t help the currency cross pair that Vice Finance Minister Masato Kanda tried to jawbone the yen by hinting that JPY’s recent downswings are “speculative” and “not desirable” to authorities that may be “ready to respond 24 hours a day, 365 days a year.”
Will GBP/JPY extend its downswing? Or will the longer-term uptrend play out in the end?The pair is having trouble making new lows as it stays near the S1 (188.80) Pivot Point line, multi-day trend line support, and the 200 SMA in the 15-minute time frame. It’s also about 30 pips away from dropping a full average daily volatility worth of pips.
A couple of bullish candlesticks could draw in GBP bulls who are looking for an extension of GBP/JPY’s longer-term uptrend.
A move to the 189.50 Pivot Point line or the 190.00 previous high is possible especially if a technical bounce is accompanied by a fundamental catalyst. Maybe it’s BOE Gov. Bailey’s 3:00 pm GMT speech?
