With the U.S. markets out on bank holiday, we’re setting our sights on GBP/JPY’s short-term resistance ahead of the U.K.’s labor market data releases.
Which way do you think the pair will go before and after the event?
Before moving on, ICYMI, I’ve listed the potential economic catalysts that you need to watch out for this week. Check them out before you place your first trades today!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
In an interview published over the weekend, ECB Chief Economist Philip Lane fought against a rate cut and said that easing policy too quickly would be “self defeating”
Over the weekend, Taiwan elected William Lai Ching-te, which marked the third consecutive term for a U.S.-friendly Democratic Progressive Party (DPP) Presidency
PBOC surprisingly left its medium-term lending rate unchanged at 2.5% despite expectations of a rate cut in January
Rightmove: Average asking prices for British homes rose by 1.3% m/m in January, the strongest December-to-January increase since 2020Melbourne Institute’s inflation gauge rose from 0.3% m/m in November to 1.3% m/m in December and marked the biggest increase in 17 months
ANZ: Job advertisements in Australia in December: 0.1% m/m (-5.1% m/m in November)
Japan’s preliminary machine tool orders in December: -9.9% y/y (-13.6% y/y in November)
Germany’s wholesale selling prices in December: -0.6% m/m (0.2% m/m forecast, -0.2% m/m previous)
Price Action News
Overlay of NZD vs. Major Currencies Chart by TradingView
Trading was generally muted during the Asian and early London session trading, but that didn’t stop NZD bears from selling all over the comdoll’s charts!
New Zealand didn’t print any major economic data but the risk-sensitive currency may have lost pips on general risk aversion.
Aside from overall uncertainty ahead of this week’s potential catalysts, the U.S. military also had to shoot down an anti-ship cruise missile fired by Iran-backed Houthis. The attack marked the first against the U.S. forces since Washington began its air strikes in Yemen and upped the geopolitical tensions in the region.
And then there’s the PBOC saying “no thanks” to rate cut speculations by keeping its medium-term lending rates unchanged in January. The lack of monetary stimulus did not help the Chinese growth-sensitive NZD.
The New Zealand dollar is trading the weakest against EUR, USD, and GBP while registering the least losses against JPY, AUD, and CHF.
Upcoming Potential Catalysts on the Economic Calendar:
U.S. markets out on bank holiday
Eurozone’s industrial production at 10:00 am GMT
Eurozone’s trade balance at 10:00 am GMT
Canada’s manufacturing sales at 1:30 pm GMT
BOC’s business outlook survey at 3:30 pm GMT
NZ NZIER business confidence at 9:00 pm GMT
Australia’s Westpac consumer sentiment at 11:30 pm GMT
Japan’s PPI at 11:50 pm GMT
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 TV
With no top-tier reports scheduled from the U.S. today, we’ll likely see at least some positioning ahead of the U.K.’s labor market release.
Word around is that we’ll see stronger employment change and three-month average earnings in December. If we do see stronger labor market figures, then the Bank of England (BOE) would have more reason to keep its policies restrictive and its interest rates high.
Then again, overall risk sentiment could take over and weigh on “risk” assets like GBP. As mentioned above, escalating geopolitical tensions in the Middle East and a denial of the expected monetary stimulus in China have made it difficult for Asian session traders to buy risky bets like NZD.On a technical basis, GBP/JPY testing a resistance zone from the previous week could draw in sellers. Aside from that, GBP/JPY’s current levels are also close to the R1 (185.40) Pivot Point line and the 185.50 minor psychological level.
And then there’s the bearish divergence in the 15-minute time frame which may factor in case GBP/JPY gains bearish momentum.
Let’s see if the next trading sessions’ traders view a potentially strong U.K. labor market report as GBP bullish or bearish.
If the markets ignore estimates of strong wages and/or inflation and price in a BOE interest rate cut anyway like they’re doing with the U.S. data and the Fed, then GBP/JPY may get rejected from the R1 area and see selling pressure. A revisit to the previous inflection points like the 183.94 Pivot Point line or the 184.50 previous low may be in the cards if Guppy gains bearish momentum.
