- Expected drop from 6.7% to 4.8% this week may create room for disappointment and increase pressure on the GBPJPY, already at a multi-month high.
- Recent market activity, including rejection of a downside wick and an immediate move to the upside, supports a bullish GBPJPY outlook. Further upward movement could challenge the three-month high, potentially prompting correction or intervention.
The UK’s inflation rate due this week (early early Wednesday morning), and there is a huge projected drop in the reading from last month, from 6.7% to 4.8%. This huge drop leaves a lot of room for disappointment, and higher CPI reading could exert upside pressure on the GBPJPY, which is already at a multi-month high. It is for this reason I bring up the possibility that traders should watch for intervention in this pair, whether direct or indirect.
Supporting the possibility of a bullish GBP/JPY is the rejection of yesterday’s significant downside wick (touching the 50-day moving average on the 1-hour chart). This rejection was followed by a further move to the upside.
Further upside will see the pair challenge the three-month high at 186.77 and open the possibility for a correction/ intervention. In the past, ¥185.00 has proven to be somewhat of an anchor point for the pair, but perhaps a more accurate support is now ¥185.50?
Don’t forget that US CPI numbers are due this week too, one day before UK numbers hit the market.
