- Risk on, weaker than expected Japan data propels the pair towards 147.00.
- Brexit and developments surrounding the trade deal seem crucial for now.
GBP/JPY is at the intra-day high around 146.20 within few minutes of Tokyo open on Friday. The pair recently reversed as sluggish household spending and labor cash earning data from Japan came in weaker than expected. Adding to the pair’s strength was optimism surrounding Brexit and the US-China trade deal.
February month overall household spending and labor cash earnings dropped to +1.7% and -0.8% (YoY) respectively against +2.1% and +0.8% market consensus. The release validates recent comments from the Bank of Japan (BOJ) Governor Haruhiko Kuroda favoring loose monetary policy.
On the other hand, trade talks between the US and China are progressing well. Leaders of both the economies, namely the US President Donald Trump and his Chinese counterpart Xi Jinping has been lauding the developments expecting the much-awaited deal to come in place soon.
Furthermore, the UK PM Theresa May’s ability to join hands with the opposition Labour party seems working effectively towards breaking the Brexit deadlock. The alliance is discussing major plans and the UK Times recently reported that the PM May is close to submitting documents for the deadline extension as soon as by Friday-end.
Investors may now observe progress on the US-China trade deal and Brexit in order to determine near-term market direction whereas Japan’s February month leading economic index could also be of importance to watch. The economic sentiment gauge from Japan is likely to increase to 97.3 from 95.9.
GBP/JPY Technical Analysis
The GBP/JPY pair’s bounce off the support-turned-resistance stretched since mid-March indicate brighter chances of its pullback to 147.00 with 147.50 and 148.40 acting as follow-on resistances to observe for buyers.
Alternatively, downside break of 145.55 support-line can drag the quote back to 50-day simple moving average (SMA) level of 145.00 and then to 200-day SMA near 144.70. It should also be noted that the 143.50 comprising 100-day SMA becomes crucial support.
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