GBP/JPY Outlook: Turns Positive After Upbeat UK Jobs Data, Aiming at 154
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- The GBP/JPY pair rose for the third consecutive day and hit over one-week highs.
- The BoE remained supportive of a rate hike move backed by positive UK employment data.
- As Brexit worries mounted, the safe-haven JPY benefitted from the cautious mood.
The GBP/JPY outlook turned bullish after the jobs data was released. However, the pound sterling seems to find a bottom and may try for an upside correction.
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Although it fell several pips from its 1.5-week high earlier on Tuesday, the GBP/JPY cross held strong gains in the first half of the European session.
For the third straight day, the cross gained some support as the pound rose sharply in demand. In addition, the BOE Governor Andrew Bailey’s hawkish comments overnight played a key role in supporting the pound and the GBP/JPY cross.
In his testimony to the Special Committee on Finance of the UK Parliament, Bailey said he is very worried about inflation and that all future meetings will focus on raising rates. Following the UK’s latest employment report, which showed the unemployment rate fell from 4.5% in August to 4.3% in September, one-day buying interest increased.
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In September and October, the number of employed people increased by 160,000, indicating that the end of the state layoff regime did not worsen the labor market. Nevertheless, according to the data, the Bank of England needs to raise interest rates by 15 basis points as soon as possible in December, which contributed largely to the sharp rise in the GBP/JPY cross.
Investors remained concerned about inflationary pressures rising faster than expected. As a result, equity markets were cautious, which contributed to the Japanese yen’s relative safety. Furthermore, the Northern Ireland Protocol impasse limited the GBP/JPY price increase, at least temporarily.
GBP/JPY technical outlook: Poised to gain further
The GBP/JPY price remains strong on the day. The cross remains buoyant above the 20-period SMA on the 4-hour chart. Meanwhile, the price is also supported by the 50-period SMA. So far, the average daily range for the cross is 78% which shows that much of the volatility for the day is over. Furthermore, the volume is above average for the up bar, which shows that the price can go further north. On the upside, the price may find hurdles at 154.00 (200-period SMA) ahead of 154.60 (horizontal level) and then 155.00 (round number).
On the downside, the cross may find support around the 20-period SMA at 153.10 ahead of the swing low area near 152.50.
