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JPY Under Renewed Pressure Following Core Yield Surge, GBP Buoyed By Domestic Data

FOREX
  • The US inflation report came in largely in line with expectations which looks likely to prompt the Federal Reserve to keep rates unchanged on Wednesday. Despite a sharp reversal higher for US yields, the path of least resistance in currency markets was generally lower for the greenback, with the Japanese Yen performing the worst in G10.
  • USDJPY has bounced around 125 pips from the earlier 139.01 lows, reinforcing the bullish technical trend conditions. Attention is on key resistance at the top of a bull channel drawn from the Jan 16 low. The line intersects at 141.30 today. A clear break of this hurdle would reinforce a bullish theme and open 141.61, the Nov 23 2022 high.
  • Interestingly, GBPJPY has extended its move back above 175 and looks set to close at its highest level since late 2015.
  • The GBP strength comes hot on the heels of stronger-than-expected UK jobs and wage data, which triggered the biggest selloff in short-dated Gilts in over 8 months. GBPUSD has also thrived, bouncing back strongly following yesterday’s underperformance that saw the pair briefly drop as low as 1.2487. Cable is flirting with a close above the 1.2600 mark for just the fifth time this year. A sustained move above this level would expose key resistance at 1.2680, May 10 high. The first support moves up to 1.2468, the 20-day EMA.
  • Wednesday sees UK GDP data where the economy is expected to advance +0.2% m/m in April. US PPI data for May will also cross before the focus then quickly shifts to the FOMC decision.
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