GBPJPY is still trending higher, moving above a rising trend line on its 1-hour chart and getting ready for another test of support. The trend line coincides with a former resistance at the 146.00 to 146.50 levels, which might hold as support from here.
The 100 SMA lines up with the rising trend line, adding to its strength as a floor. This is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside. The gap between the moving averages is widening so bullish momentum is getting stronger.
Stochastic is indicating oversold conditions, which means that sellers need to take a break and let buyers take over. GBPJPY could move up to the previous highs around the 148.50 minor psychological resistance or higher.
The BOE was less upbeat than expected in their latest policy meeting, citing that price pressures and growth could be subdued in the coming year. They had a unanimous vote to keep interest rates and asset purchases unchanged but warned that adjustments could go either way depending on Brexit risks.
Still, economic data from the UK has been mostly stronger than expected this week. Headline and core CPI came in better than expected and printed faster gains in price levels while the claimant count showed a smaller increase in joblessness. The average earnings index advanced from 2.4% to 2.5% to reflect stronger wage growth while retail sales came in line with expectations of a 0.2% uptick.
As for the yen, the Fed’s decision to hike rates and indicate room for three more increases next year could push the currency on another leg lower. The BOJ is scheduled to announce its monetary policy statement early next week and could give more details on their yield-targeting measures.
By Kate Curtis from Trader’s Way