The GBPJPY currency pair is consolidating as traders await UK inflation data scheduled for release on Wednesday. UK Headline Inflation is expected to ease slightly to 8.2% year-to-year in June, down from 8.7% in May. Meanwhile, UK core inflation is expected to remain unchanged at 7.1% year-to-year.
In response, the persistently high inflation has led to expectations of prolonged higher interest rates in the UK, with the Bank of England (BOE) maintaining an aggressive stance on the prospect of further interest rate hikes, ultimately boosting the GBP. However, there are concerns that excessive tightening could raise the risk of a recession and potentially weaken the Sterling. In contrast, the BOJ may tweak its monetary policy, which may mitigate some of the downside risk for the JPY.
The GBPJPY currency pair tumbled and found support at 179.507; however, a slight pullback ahead of the UK CPI data allowed the pair to establish resistance at 182.171, the Golden Ratio. Currently, the currency pair is consolidating between the 38.20% Fibonacci Retracement and the 50% level in a fight for dominance.
If the 181.154 support at the 38.20% Fibonacci Retracement fails to hold, the currency pair may retest the 180.525 support at the 23.60% Fibonacci Retracement which may pave the way towards the major support of 179.507, edging the pair further below the 50-day moving average. However, robust inflation data could encourage a pullback towards the 181.663 resistance at the 50% level, where the Golden Ratio may become a point of interest for upside opportunities.
The GBPJPY currency pair is consolidating between the 181.154 support and the 181.663 resistance. If UK CPI data cools, the currency pair could see a pullback towards the Golden Ratio; however, the slight dip could encourage a break through the 181.154 support and see the pair to lower levels of support.
Sources: TradingView, Reuters
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