Fundamental Analysis of GBP/JPY for April 19, 2019

JPY gained impulsive momentum recently against GBP. So, the pair is going to trade with a bearish bias in the coming days.

The UK posted a downbeat CPI report. On the other hand, Average Earning remains steady. Besides, retail sales also surged last month that is a promising sign for the domestic economy. The UK is in the grips of political gridlock without prospects of easing. Theresa May's government failed to agree on the Brexit option. The EU leaders granted the UK a 6-month extension until October 31.

Recently UK Average Earning Index was published unchanged as expected at 3.5%, Unemployment Rate remained flat at 3.9%, and Claimant Count Change showed a negative outcome of an increase to 28.3k from the previous figure of 26.7k which was expected to decrease to 17.3k. Moreover, UK Retail Sales expanded sharply to 1.1% from the previous value of -0.6%, much better than the forecast for a modest gain to 0.2%.

On the JPY side, today National Core CPI report was published with an increase to 0.8% which was expected to be unchanged at 0.7% while BOJ is predicting inflation to fall. The Bank of Japan is due to post an inflation outlook next week, so the regulator is assumed to predict that inflation will remain below the 2% target. The central bank is likely to downgrade its growth and price forecast for the fiscal year due to headwinds from a slowdown in the global economci growth. Moreover, Japan's government is considering a sales tax hike in October. This measures could impact the consumer spending and money flow in the economy. A tax hike is sure to influence JPY in the medium term. Next week, the Bank of Japan is holding a policy meeting and a press conference to follow. Besides, traders are anticipating an economic outlook report and a monetary policy statement. Thus, JPY is responsible for higher volatility in the pair next week.

To sum it up, JPY has been propped up by the latest economic reports. GBP has been hurt by a raft of mixed economic data that is bearish for the British currency. Nevertheless, the pressure is expected to be short-lived as GBP has a higher chance to regain momentum as things are unfolding positively for the UK in the coming days.

Now let us look at the technical view. The price managed to sustain the bearish momentum which is expected to push the price lower towards 144.00 support area in the coming days. The price recently managed to dip below the dynamic level of 20 EMA with a daily close which indicates further bearish pressure. As the price remains below 147.00 area with a daily close, the pair will sustain the bearish pressure in the coming days. A break below 144.00 with a daily close is expected to extend the bearish momentum with a target towards 141.00 area.

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The material has been provided by InstaForex Company - www.instaforex.com

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