GBP/JPY sinks to a fresh weekly low near 181.00 to close out the week

• The GBP/JPY slipped back towards the 181.00 handle heading into the Friday close.
• The Yen is seeing recovery across the marketspace, sending the GBP down 1.3% from the week’s high.
• BoJ policy statement due next Tuesday, BoE rate call Thursday.

The GBP/JPY twisted back into familiar low side territory for the week, capping off Friday’s trading just north of the 181.00 handle. The Guppy hit a fresh low for the week at 181.04 before catching a bounceback into 181.40 at the closing bell.

The pair is now set to drift into next week’s central bank action, with both the Bank of Japan (BoJ) and the Bank of England (BoE) on the cards.

Tuesday sees the BoJ give their latest rate call, and investors are looking for adjustments in the Japanese central bank’s policy regime. Japanese inflation continues to stick higher than BoJ policymakers initially expected, with the BoJ bluntly concerned about inflation flagging below their 2% minimum target.

Months of inflation running hotter has left Japanese consumers begging for action from the BoJ to defend their rapidly dwindling purchasing power at the hands of a crumbling Yen that has done little but decline as global interest rate differentials eat away at the JPY.

Despite a 3% pullback from 2023’s highs near 168.80, the Yen remains down almost 17% against the Pound Sterling and the GBP/JPY pair up over 2,600 pips from the year’s lows near 155.00 set back in January.

On the GBP side, the BoE is on the docket for Thursday with their latest rate call, but money markets have priced in a nearly guaranteed rate hold as the UK economy continues to flounder.

This week’s employment and Purchasing Managers’ Index figures published just this last Tuesday did little to bolster confidence in the UK economy, with an unexpected increase in the number of unemployment benefits seekers and mixed PMIs suggesting lagging growth which continues to chug.

GBP/JPY Technical Outlook

The GBP/JPY spent most of the week trading towards the downside as the Yen looks to firm up after a disastrous 2023. The Guppy hits the closing bell down 1.3% from the week’s early Tuesday high of 183.75 near 181.40.

The 200-hour Simple Moving Average (SMA) continues to vex the GPB/JPY as the pair trades laterally against the near-term trend, and continued challenges to the downside could open the way for further declines heading into next week’s central bank double showing.

Despite extreme overbought chart conditions, intraday traders might want to wait for a bullish reversal signal on the hourly candle Moving Average Convergence-Divergence (MACD) oscillator, while daily candlesticks see the Relative Strength Index (RSI) firmly planted in the midrange, pointing donwards.

GBP/JPY Hourly Chart

GBP/JPY Technical Levels