Annual UK inflation data published at the start of the European session this evening is a focus for Pound investors to monitor the movement of the British currency.
The UK consumer price index rose to 9.4%, beating expectations for a rise of 9.3%, compared to the previous reading of 9.1%.
This is the UK's highest inflation reading for 40 years, ie since 1982!
Let's examine the movement on the GBP/JPY currency pair price chart in the European session.
The Pound currency is seen not to react to the positive movement even though the UK inflation data has been published high and will further strengthen the expectation for a rate hike by the central bank of England.
Furthermore, the Bank of England (BOE) also signaled the same as the European central bank, to raise interest rates by 50 basis points at the latest policy meeting.
It is possible that the initial reaction of the Pound's decline is due to investors starting to take profits for previous positions (price-in), to obtain discounted prices due to expectations for further strengthening in the future.
Therefore, it is not surprising that the price on the GBP/JPY chart will show a momentary decline, but investors will be alert for several important zones to evaluate the signal of further movement of the price.
For the initial drop in price, it is seen that it will test the RBS (resistance become support) zone at 164.500, but it will be an early signal for a change in the bearish trend after the drop passes the support level of the Moving Average 50 (MA50) on the 1-hour time frame on the GBP/JPY chart.
A further drop in price is expected to reach the concentration level around 162.00 support for bearish price movement.
However, if the Pound strengthens again to continue the previous increase, the price increase will continue to record the latest 4-week high level with a target to the resistance zone of 168.00.
