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Asset Watch

GBP/JPY price may fall to a multi-week low

 

Thursday, September 7, 2023

GBP/JPY price news and analysis

• The British Pound falls as the BoE nears the end of the rate hike cycle
• The GBP/JPY corrects lower, key levels to watch

 

The value of the British Pound has experienced a decline, primarily due to growing expectations that the Bank of England may raise interest rates just once, by 25 basis points, bringing rates to 5.5%, and subsequently conclude its interest rate hiking cycle. These expectations are grounded in the backdrop of diminishing inflation levels and optimism that they will continue to decrease, as prices have been rising at a slower pace.

These expectations were reinforced by statements from the Chairman of the Bank of England, Mr. Bailey, who indicated that current interest rates are approaching their peak and suggested that a further decline in inflationary pressures is anticipated throughout the year. It’s noteworthy that the weakening labor market in the United Kingdom would contribute to the reduction in current inflation levels.

As for the Japanese Yen, policymakers have articulated that they will not tolerate a further depreciation of the yen against the US dollar. They have hinted at the readiness of the Japanese Central Bank to intervene in the currency market to prevent a further decline in the yen’s value. This intervention would involve coordination with the Japanese government to monitor the exchange rate of the Japanese yen, considering the fundamentals of the economy.

GBP/JPY Price Daily Chart

 

Chart source ADSS Platform

 

On August 22, the GBP/JPY rallied to a multi-year high at 186.76 then fell as some traders took profits. The pair corrected lower and created a lower high at 186.05 then started a sideways move creating a lower high with a higher low.

Currently, the price moves in the trading zone located between 186.17-182.63 and it could be on the way for a test of the low end of the zone. Therefore, a daily close below the low end could encourage bears to press the pair towards 178.95. However, the support level residing at 180.04 should be monitored.

On the other hand, a daily close above the high end of the zone could entice bulls to retake the initiative and rally the price towards 189.21. That said, the resistance levels residing at the 22 of August high and the resistance level at 187.80 should be kept in focus.


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