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14 Feb 2014
GBP/JPY could now be about the BoJ
FXStreet (Guatemala) - GBP/JPY has some way to go before it makes such an impression on markets as cable has done so. The pair is still some four big figures away from highs witnessed at the start of the year. But, we have the BoJ coming up soon this month, 17-18 February, which might bring some action into the Yen given it’s recent weakness and effects on CPI inflation - this could ultimately bring some headwinds about for the cross.
GBP/JPY has managed to claim the psychological 170 handle again and rallied up on the back of sterling’s strength. Now markets are waiting for what might be a unanimous set of MPC Minutes in February from the MPC both in terms of the votes on policy settings and any vote on the revised guidance framework. Strategists at RBS explained, “The new guidance framework is so diffuse and flexible that it is hard to see how anyone could object in principle (it effectively allows MPC members to attach varying weights to a wide range of indicators at different points in time)”. They added, “Whilst the abandonment of the explicit forward guidance might allude to a re-emerging divisions within the MPC, at this stage we believe these differences are primarily about the (dubious) merits of a more explicit policy 'pre-commitment', rather than indicative of any meaningful 'hawkish' shift in policymakers' thinking – the MPC lowered their CPI projection in the February Inflation Report”. For the Yen, we might see some action from the BoJ’s meeting. Strategists at Bank Of America Merrill Lynch said, “Regarding monetary policy, our main scenario has been that the Bank of Japan will implement additional easing (larger purchases of ETF or extension of the average maturity of its JGB holdings) before the consumption tax rate hike, and we expected action to be taken at the Monetary Policy Meeting of 17-18 February. Three main reasons are: (1) alarm at the effect of the consumption tax change; (2) the price-raising effect of the weaker yen is expected to peak out in 2Q, causing CPI inflation to level off; and (3) by taking preemptive action, the BoJ would have a stronger effect on financial markets. After the BoJ's previous meeting, the state of developing countries prompted concern and signs of a slowdown emerged in US economic data. Stock and forex markets have shown instability in response, so the possibility of BoJ action has not disappeared”.
GBP/JPY Levels
The 20 DMA is 169.15, the 50 DMA is 170.10 and the 200 DMA is 159.00. RSI (14) reads 57.62. Supports are ascending from 167.55, 168.30, 168.70, and 169.10. Spot is 170.38 while residences are 171.00, 171.45 and 172.30.
GBP/JPY has managed to claim the psychological 170 handle again and rallied up on the back of sterling’s strength. Now markets are waiting for what might be a unanimous set of MPC Minutes in February from the MPC both in terms of the votes on policy settings and any vote on the revised guidance framework. Strategists at RBS explained, “The new guidance framework is so diffuse and flexible that it is hard to see how anyone could object in principle (it effectively allows MPC members to attach varying weights to a wide range of indicators at different points in time)”. They added, “Whilst the abandonment of the explicit forward guidance might allude to a re-emerging divisions within the MPC, at this stage we believe these differences are primarily about the (dubious) merits of a more explicit policy 'pre-commitment', rather than indicative of any meaningful 'hawkish' shift in policymakers' thinking – the MPC lowered their CPI projection in the February Inflation Report”. For the Yen, we might see some action from the BoJ’s meeting. Strategists at Bank Of America Merrill Lynch said, “Regarding monetary policy, our main scenario has been that the Bank of Japan will implement additional easing (larger purchases of ETF or extension of the average maturity of its JGB holdings) before the consumption tax rate hike, and we expected action to be taken at the Monetary Policy Meeting of 17-18 February. Three main reasons are: (1) alarm at the effect of the consumption tax change; (2) the price-raising effect of the weaker yen is expected to peak out in 2Q, causing CPI inflation to level off; and (3) by taking preemptive action, the BoJ would have a stronger effect on financial markets. After the BoJ's previous meeting, the state of developing countries prompted concern and signs of a slowdown emerged in US economic data. Stock and forex markets have shown instability in response, so the possibility of BoJ action has not disappeared”.
GBP/JPY Levels
The 20 DMA is 169.15, the 50 DMA is 170.10 and the 200 DMA is 159.00. RSI (14) reads 57.62. Supports are ascending from 167.55, 168.30, 168.70, and 169.10. Spot is 170.38 while residences are 171.00, 171.45 and 172.30.