GBP/JPY drops as rumors amid continued BoJ’s Yenterventions

A return to 203.00 was seen in the GBP/JPY as markets began to expect further market intervention. On Wednesday, the Yen surged against the Pound Sterling by a whole percentage. This comes after a sharp 2% decrease and spike in BoJ spending last week.

The GBP/JPY pair resumed its recent trend of steep drops on Wednesday, down more than one percent for the day as investors continue to believe that more direct intervention spending is being done in an effort to support the weakening Yen.

It is believed that the Bank of Japan exceeded its budget for market operations by ¥2.14 trillion on Friday, the 14th, following a week in which current account statistics significantly above the predictions of money brokers.

Official announcements from Japanese officials are not anticipated, but if policymakers intervening in FX markets caused Wednesday’s prolonged decline and last Friday’s Yen surge, that would make the third and fourth times in 2024 that the Yen has defended itself.

In the global markets, the Yen has turned into a sell-side favorite and is still very negative. GBP/JPY is trading at 16-year highs despite the Guppy’s -2.44% five-day slump, and Japan, a nation with an already high debt ratio, is finding it more and more expensive to directly intervene in the market.

The UK Producer Price Index (PPI) numbers, which were issued early on Wednesday, did little to help the pound sterling. PPI inflation in June decreased 0.3% month-over-month (MoM) from the previously corrected 0.0% and completely reversed the expected increase to 0.1%.

Thursday’s labour data for the UK is anticipated to reveal a significant drop in unemployment claims. June’s claimant count change numbers are expected to drop from 50.4K to 23.4K, and a blunder in the headline jobless rate could further undermine the Sterling.

The Japanese National Consumer Price Index (CPI) inflation report is coming on Friday. Although the annualized CPI inflation print for June is predicted to increase slightly from 2.5% to 2.7%, it is unlikely to be high enough to cause the BoJ to hike interest rates. Market effects at the print tend to be subdued because Tokyo CPI inflation data, which is released several weeks earlier, is also used to estimate Japanese National CPI inflation rates.
 
Technical Factors

The Guppy Technical Indicator tumbled back on Wednesday, falling toward the 203.00 handle amid broad-market strength in the Yen and flipping the pair into the red for the month of July, erasing the month’s gains and dragging bids down nearly 2.5% from July’s 16-year peak of 208.11.

A thin near-term consolidation range near 205.50 could provide an intraday technical support level for bids if they continue to circle the drain, but downside momentum still sees significant upside pressure. Daily candlesticks are still soaring well above the 200-day Exponential Moving Average (EMA) at 192.07, and bids would still need to drop another 0.8% before even coming within range of the 50-day EMA at 201.29.