Home ForexForecasts GBP/JPY: Testing highs ahead of key UK economic data

GBP/JPY: Testing highs ahead of key UK economic data

by SuperiorInvest
  • UK wage growth is key for the Bank of England to sustainably achieve its inflation target
  • GBP/JPY struggling near recent highs
  • Divergence points to loss of momentum

The coming days will offer several important data points for the UK that could help determine when the Bank of England will begin cutting interest rates and, by extension, where the currency is headed in the coming months.

Tuesday's jobs report is always well-tracked, but with the unemployment component less reliable than usual, it's average earnings that will matter most.

At 6.5% in November, it is currently too high to allow inflation to fall to 2% sustainably and the Bank of England expects it to decline sharply in the coming months, as it is expected to have started in December.

A double top at the November and January highs?

Recently, it has been performing very well, like many coins, recovering all the December losses to surpass the November high.

GBP/JPY-Daily Chart

Source – OANDA

continues to struggle near 189, where it has now repeatedly run into resistance. And this time, he did so with much weaker momentum, with a notable divergence between stochastic, MACD and price.

This could potentially establish a double top in the near term, with the neckline falling to the February 1 low (around 185.23), the break of which would be a bearish development.

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