GBP/JPY Aiming for 196/200

GBP/JPY Aiming for 196/200

GBP/JPY Aiming for 196/200

We like the U.S. dollar and we like the British pound because the Federal Reserve and the Bank of England will be the first 2 central banks to raise interest rates (in that order). This morning’s MPC minutes were hawkish and reading between the lines, there’s a very good chance that at the next meeting, more than one member will vote to raise rates. The hawkish monetary policy biases of the Fed and BoE is positive for GBP/JPY and not only do we expect the pair to hit 196 but we believe the move could also extend to 200. UK retail sales are scheduled for release tomorrow and based on the rise in wages, stronger spending is expected and if we are right, that could take the currency pair above 194.00.

Technically, GBP/JPY is consolidating between 192 and 194.40. If it breaks to the upside and we think it will, it should be a clear shot to the June highs. After that, 200 is in focus because not only is it a key psychological level but also the 61.8% Fibonacci retracement of the 2007 to 2011 decline. However if GBP/JPY breaks below 192, it could sink down to 190 at which point there is a risk of a double top. With that in mind we don’t think the uptrend will break.

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