Investors are beginning to be wary of price movements on the GBP/JPY currency pair chart with expectations of a bullish pattern disrupted by UK economic data published yesterday. What happened?
In yesterday's European trading session, the Pound currency showed initial strengthening after the release of UK inflation data which rose higher than expected figures but failed to sustain the strengthening before plunging.
With the Bank of England (BOE) expected to raise interest rates by 50 basis points at its September meeting, UK inflation has reached its latest high since 1982 at 10.1% for July.
If the interest rate increase of 50 basis points takes place, it will be the seventh consecutive rate increase and will make the cost of borrowing to be at the highest level since 2008, but it can be seen that the latest employment report has begun to give the impression that the labor market is starting to 'cool down'.
If you look at the price movement on the GBP/JPY chart, the price since last Tuesday has shown a bullish movement pattern after jumping from the 160.500 zone and successfully crossing the Moving Average 50 (MA50) obstacle level in the 1-hour time frame and also crossing the 162.00 zone.
On the release of UK inflation data in the European session yesterday, prices rose slightly to hit a weekly high at the 163,500 resistance zone before retreating to decline again until trading resumed at the end of the New York session.
Also showing an interesting movement pattern today, the price was supported by the MA50 support level and rose again in the European session trading this evening.
Price looks set to retest the 163,500 resistance zone and is likely to break through it to record its latest 3-week high.
The price that continues to rise higher is expected to test the barrier level of 164.500 before the continued rise will aim at the height of 166.200 where it became the concentration zone tested at the end of July but failed to break through.
On the other hand, if the price fails to continue the increase and there is a drop back below the MA50 support level, the 162,000 zone is seen to be the focus to be tested before investors assess the signal of a bearish trend change on the price chart.
If the price decline continues, the price is expected to drop to the 160,000 zone that was tested at the beginning of the week, but is the zone still capable of rebounding the price after this?
