In the UK, robust macroeconomic indicators have underscored the imperative for future rate hikes by the esteemed Bank of England (BoE), bolstering the GBPJPY currency pair. With year-on-year GDP growth surging from -0.3% to a formidable 0.9%, surpassing the anticipated 0.5%, and various sectors like the Balance of Trade, Industrial and Manufacturing Production, and Construction Output outperforming predictions, the prospects of a forthcoming September BoE rate hike have gained traction. This potential shift stands in stark contrast to Japan, where Core Inflation’s descent to levels last seen in March 2021 has anchored the Bank of Japan in an ultra-loose monetary stance. 

However, amidst this contrasting landscape, a twist emerges. The release of UK labour market data reveals an unexpected rise in the unemployment rate from 4% to 4.2%, tempering the enthusiasm generated by the previous week’s triumphant data. This unforeseen development introduces an element of uncertainty, raising the pivotal question of whether the Bank of England will persist with its hawkish trajectory, imparting fresh momentum to the Sterling’s rise, or if a pause might be considered.  

Technical 

An upward trend is apparent on the 4H Chart, with the GBPJPY currency pair diverging further away from the 50-day moving average. If a breakout from the 185.011 resistance occurs, the next point of interest may be the 188.339 major resistance which could mark the continuation of the uptrend as this level stands as a swing high experienced in 2015. 

However, labour market data could encourage the 185.011 resistance to hold, which may promote a leg down towards the 182.976 support at the 23.60% Fibonacci level. If the price action breaks down this support, the currency pair may succumb to the 180.699 support at the 50% level, which may promote a reversal.  

Summary 

The GBPJPY currency pair is nearing a 2015 swing high, promoted by the prospect of a September rate hike from the BoE due to strong macroeconomic data. If a breakout from the 185.011 resistance occurs, the 188.339 major resistance may promote the continuation of an uptrend. However, poor labour market data may encourage a leg down towards the 182.976 support.  

Sources: TradingView, Reuters 

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