The GBPJPY currency pair declined after the release of UK inflation data. In June, the market was closely watching for signs of cooling inflation, as the previous month’s increase had led the Bank of England (BoE) to raise interest rates by 50 bps. Although headline and core inflation came in below expectations last week, they still remain at elevated levels, which increases the likelihood of the BoE continuing its hiking policy, thereby bolstering the currency pair.
Additionally, Retail Sales in the UK showed a year-on-year increase, surpassing expectations, going from -2.3% to -1% instead of the anticipated -1.5%. However, the S&P Global PMIs for the UK, set to be released today, may limit the currency pair’s gains as both the Manufacturing and Services PMIs are expected to decline. The Manufacturing PMI is predicted to slow from 46.5 to 46.1, while the Services PMI is expected to drop from 53.7 to 53.
Technical
The GBPJPY currency pair found its footing at the 179.801 major support, marking this level as a pivot point for upward momentum. A 1.1% rise in the price level saw the currency pair surge above the 50-day moving average and establish resistance at 182.471. If the leg up is sustained, the 182.471 resistance may be retested, which may mark the 183.798 major resistance as a pivot point for upward momentum.
However, weakening demand could encourage a drawback towards the 23.60% Fibonacci Retracement, which may promote the price level to retest the 181.451 support at the 38.20% Fibonacci Retracement, thereby continuing the downward momentum towards the 179.786 major support.
Summary
The GBPJPY currency pair surged after finding its feet at the 179.786 major support, establishing resistance at 182.471. If the upward momentum is sustained, this resistance level could be significant in furthering an upward trend; however, unfavourable PMI data could encourage a pullback towards the 179.786 major support.
Sources: TradingView, Reuters
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