Gbpjpy Gains Amid A Dovish Boj

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Gbpjpy Gains Amid A Dovish Boj

GBP/JPY Gains 1% Amid A Dovish BoJ, Remains Above 20 SMA

The GBP/JPY gained 1% during Friday's trading session and was last seen trading above the 20 SMA on the D1 chart. If the cross maintains this momentum for the rest of Friday, it will end up closing the week in green.

The GBP/JPY pair gained bullish momentum amid strong selling pressure faced by the JPY, mainly due to the BoJ stance. The Bank of Japan is all set to host a meeting next week, and all the forecasts are hinting at a dovish policy. On the contrary, the GBP gained strength after the retail sales figure.

BoJ Expected To Maintain Its YCC Policy

The retail sales data in the UK increased more than the expectations and came out to be 0.7% month over month. However, most of the analysts were calling a value of around 0.2% only. So that's one of the factors which supported the rise in the GBP against the JPY.

If we look at the next steps of the Bank of England, there's a 45% chance of a 50 bps rate hike after the recent inflation figure. Similarly, there's also a forecast of a 25 bps rate hike during the September and the November meeting as well. As we enter February 2024, yet another 25 bps may also happen, which will raise the terminal rate in the UK to 5.75%.

If we look at the Japanese side, the CPI reading was 3.3% on a YoY basis. At the same time, the core measure in Japan was at 4.2% on a YoY basis.

Looking ahead, the BoJ is expected to maintain the YCC policy as the central bank still believes that inflation is a threat to the economy.

So we can say that the divergence of the BoJ and the BoE is causing the JPY to turn lower while the GBP is gaining strength.

If we look at the GBP/JPY technical analysis, the important support levels are 180.00 followed by 179.50 and then 179.00. On the upside, the resistance levels for the GBP/JPY are located at 182.60 and then at 183.00. If the 183.00 level is broken by the GBP/JPY bulls, the next stop will be the 184.00 level.

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