Japanese Yen GBP/JPY Prices, Charts, and Analysis
- UK inflation misses expectations but remains elevated.
- GBP/JPY technical outlook is turning negative.
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GBP/JPY is in the process of printing a fourth lower high on the daily chart after the British Pound edged lower after the latest UK inflation report. The lower-than-expected CPI release saw UK terminal rate expectations dialed back from around 6.25% to just below 6%.
The technical outlook for GBP/JPY remains negative in the short-term with the daily chart showing the pair rolling over from the recent multi-year high. GBP/JPY has rallied by just under 18% this year on a combination of ultra-loose Japanese monetary policy and ongoing UK monetary tightening. While the former is still in play, the latter may be changing after today’s inflation data and the expectations that July’s inflation reading will be even lower as the Ofgem energy price cap – reduced from £2,500 to £2,074 – comes into play.
The daily chart shows GBP/JPY moving lower after multi-touches, and rejections, of the 184 level. The pair are also now below the 20-day simple moving average, in the process of making a fourth lower high in a row and heading back towards short-term support at 179.48. A confirmed break below here would bring the 50-day sma, currently at 177.45, and the 23.6% Fibonacci retracement of the January 3rd – July 5th move at 177.03 into play.
GBP/JPY Daily Price Chart – July 19, 2023
GBP/JPY Retail Sentiment is Mixed
Retail trader data shows 28.30% of traders are net-long with the ratio of traders short to long at 2.53 to 1.The number of traders net-long is 7.08% lower than yesterday and 8.25% higher than last week, while the number of traders net short is 2.21% lower than yesterday and 14.05% lower than last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/JPY trading bias.
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