Forex Market: GBP/JPY daily trading forecast

Yesterday’s trade saw GBP/JPY within the range of 192.68-193.87. The pair closed at 193.63, surging 0.41% on a daily basis, while marking a third straight day of gains. The daily high has also been the highest level since June 26th, when the cross registered a high of 195.28.

At 8:57 GMT today GBP/JPY was down 0.03% for the day to trade at 193.50. The pair touched a daily low at 193.34 during Asian trade. At the same time, the daily high of 193.89 broke the weekly R1 level, while being the new highest level since June 26th.

Fundamentals

Japan

BoJ policy decision

At its meeting on policy on July 14th, Bank of Japan left its key interest rate unchanged at 0% and kept its pledge to expand the monetary base by JPY 80 trillion each year.

According to fragments of the central banks latest Policy Statement: “Japans economy has continued its moderate recovery. Oversees economies — mainly advanced economies — have been recovering, albeit with a lackluster performance still seen in part. In this situation, exports have been picking up albeit with some fluctuations. As corporate profits have improved and business sentiment has generally stayed at a favorable level, business fixed investment has been on a moderate increasing trend.”

“With regard to the outlook, Japans economy is expected to continue its moderate recovery trend. The year-on-year rate of increase in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices.”

“Compared with the forecasts presented in the April 2015 Outlook for Economic Activity and Prices, the growth rate will likely be somewhat lower for fiscal 2015, but will likely be more or less unchanged for fiscal 2016 and 2017. The year-on-year rate of increase in the CPI will likely be broadly in line with the April forecast.”

“Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects, and the Bank will continue with the QQE, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner.”

Bond Yield Spread

The yield on Japanese 2-year government bonds went as high as 0.017% on July 15th, or the highest level since July 13th (0.028%), after which it slid to 0.010% at the close to lose 0.003 percentage point on a daily basis.

The yield on UK 2-year government bonds climbed as high as 0.663% on July 15th, or the highest level since July 1st (0.665%), after which it fell to 0.612% at the close to gain 0.007 percentage point for the day, while also marking the sixth consecutive day of increase.

The spread between 2-year UK and 2-year Japanese bond yields, which reflects the flow of funds in a short term, expanded to 0.602% on July 15th from 0.592% on July 14th, marking a sixth consecutive day of expansion. The July 15th difference has been the most considerable one since July 1st, when the yield spread was 0.605%.

Meanwhile, the yield on Japans 10-year government bonds soared as high as 0.462% on July 15th, after which it slid to 0.461% at the close to appreciate 0.009 percentage point compared to July 14th, while marking a second straight day of increase.

The yield on UK 10-year government bonds climbed as high as 2.160% on July 15th, after which it slipped to 2.111% at the close to lose 1.7 basis points (0.017 percentage point) on a daily basis, while marking the first drop in six trading days.

The spread between 10-year UK and 10-year Japanese bond yields shrank to 1.650% on July 15th from 1.682% during the prior day. The July 15th yield difference has been the lowest one since July 10th, when the spread was 1.624%.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 193.39. In case GBP/JPY manages to breach the first resistance level at 194.11, it will probably continue up to test 194.58. In case the second key resistance is broken, the pair will probably attempt to advance to 195.30.

If GBP/JPY manages to breach the first key support at 192.92, it will probably continue to slide and test 192.20. With this second key support broken, the movement to the downside will probably continue to 191.73.

The mid-Pivot levels for today are as follows: M1 – 191.97, M2 – 192.56, M3 – 193.16, M4 – 193.75, M5 – 194.35, M6 – 194.94.

In weekly terms, the central pivot point is at 189.06. The three key resistance levels are as follows: R1 – 193.12, R2 – 195.72, R3 – 199.78. The three key support levels are: S1 – 186.46, S2 – 182.40, S3 – 179.80.