The U.K. just printed another slowdown in its inflation rate!
Will the release help drag GBP/JPY from a technical resistance? Or will it provide enough bullish momentum to cause a short-term breakout?
Before moving on, ICYMI, yesterday’s watchlist checked out EUR/NZD’s descending channel breakout ahead of a sentiment report in Germany. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
NZ GDT: Dairy prices edge up, volumes ease at auction
Japan core machinery orders fall 8.3% m/m vs. 0.9% decline expected in November
Bank of Japan leaves policy and yield curve targets unchanged, yen weakens
BOJ cuts 2022 and 2023 GDP forecasts, leaves CPI estimates more or less unchanged
China fixed-asset investment approvals almost doubled in 2022 to $218B
Tankan: Morale at Japan big manufacturers logs first negative reading in two years in January
Oil extends gains on demand optimism
Asian stock markets mixed after BOJ decision
UK inflation slows from 10.7% to 10.5% y/y in December, the second consecutive monthly decrease and the lowest rate in three months
Upcoming Potential Catalysts on the Forex Economic Calendar:
UK’s house price index at 9:30 am GMT
US PPI reports at 1:30 pm GMT
US retail sales data at 1:30 pm GMT
US industrial production at 2:15 pm GMT
Australia’s labor market reports at 12:30 am GMT (Jan 19)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: GBP/JPY
It’s been a busy week for GBP/JPY, which jumped from its monthly lows near 156.00 to trade closer to the 161.50 area of interest.
But wait! 161.50 also lines up with a range resistance that’s been around since December. And with Stochastic showing an “overbought” signal, you can bet that at least some GBP bears are watching for a rejection.
Today’s U.K. inflation reports might make or break GBP/JPY’s range. U.K.’s CPI came in at 10.5% y/y in December, slower than November’s 10.7% rate and marked the second monthly decline for consumer prices.
On one hand, a slower CPI could mean that the U.K. might not have to deal with a deep recession or higher prices over a longer period of time.
On the other hand, slowing inflation would make it easier for the Bank of England (BOE) to not be as hawkish as it was last year.
If the lower CPI reading turns out to be bullish for GBP, then GBP/JPY could break above its range resistance.
The pair could jump to the 162.30 previous high or the 163.50 levels before it sees sustained selling pressure.
But if today’s market themes focus on the Bank of Japan (BOJ) not adjusting its yield curve control limits, or if traders price in their global growth concerns, then GBP/JPY could stick to its established range.
GBP/JPY could dip to 160.00 or the 158.50 mid-range levels until GBP bulls step in again.
