It has been an eventful morning trading session for the GBPJPY currency pair following the release of UK employment data which could advocate for a less hawkish stance from the BoE, taking the wind out of the British Pound’s sails. The Office for National Statistics reported that the UK’s unemployment rate for March unexpectedly rose from 3.8% to 3.9%, against the flat expectations of 3.8%, while the economy’s claimant counts for April rose to 46.7K from 26.5K.

The UK economic data raised bets on a less hawkish monetary policy path from the BoE, sending the GBPJPY currency pair, also known as the Dragon, as low as 169.394 during the trading session. However, the Dragon could find support from the BoE’s single-minded determination to bring the UK inflation, which is still sticky at 10.1%, lower.

Technical

The 4H chart shows that the price action broke through the pivot point from above following the release of the UK employment data, but the bulls are looking to fight back and close the 4H candle above the point. The close above the point could signal a momentum shift, and the bulls could be hoping that the shift could boost the rally as they look to attack the 23.60% Fibonacci retracement level at 170.702. The fall of the 170.702 level would bring the psychological level at the seven-year high of 172.321 and the 173.851 resistance level firmly into play.

However, a sustained break below the pivot point would boost the bears’ confidence in testing the dynamic support level, which has acted as a significant barrier to the bears’ attempt to push the price lower. The golden ratio would act as immediate support should the bears sustain a break below the dynamic support. The fall of the golden ratio would leave the 167.010 and 165.461 support levels at the bears’ mercy.

Summary

The UK’s unemployment data release slightly impacted the bullish momentum of the Dragon, which has seen it rise over 0.6% for the week. Still, the bulls could be hoping to regain control as the market digest the anticipated impact of the data on the BoE monetary policy path. Should the sticky inflation provide support to the Pound, then the market could keep a keen eye on the reaction of the price action on the 23.60% Fibonacci retracement level, as a break above could trigger a run towards the seven-year high. However, a falter on the level could initiate a pullback towards the dynamic support.  

Sources: TradingView, Reuters.

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