GBP/JPY At Confluence Area; Rebound Or Continuation?

GBP/JPY registered a strong sell-off and is now located at around the 152.84 level. Technically, the pair has reached strong dynamic support levels, so we cannot exclude a temporary rebound.

The Japanese yen has taken full control after the BOJ meeting. The Bank of Japan kept the interest rate at 0.10% as expected. The Japanese National Core CPI increased by 0.1%, versus the expected 0.0%. 

Unfortunately, the British pound has taken a hit from the UK Retail Sales data. The economic indicator dropped by 1.4% even though economic analysts had expected a 1.5% growth in May after 9.2% growth in April.

GBP/JPY: Pound Hit By Unexpected Drop in Sales

Part of the explanation for the drop lies in the shift from spending in supermarkets to restaurants. Sales ex petrol fell 2.1%, while fuel sales were up 6.2%. Non-food sales improved 2.3%, with declines at department and clothing stores being offset by a 9% rise in household goods sales. The Office for National Statistics (ONS) also reported that total sales in the three months leading to May as 8.3% higher than in the previous quarter.

“Following a sharp increase last month coinciding with post-lockdown reopening, retail sales dipped slightly in May. However, they remain well above both their pre-pandemic levels and those seen in March before shops reopened,” said Darren Morgan, director of economic statistics at the ONS.

The figures, however, do little to dispel the fact that the economy is still bouncing back strongly. The power behind the recovery is coming through from both pent up demand and the ability to feed that demand as a result of many consumers being able to amass large savings during the lockdown periods of the pandemic.

gbpjpy price chart 18 june 2021

GBP/JPY is under massive selling pressure right now, so a downside continuation is favored. It has reached a confluence area formed at the intersection between the 150% Fibonacci line of the descending pitchfork with the first warning line (WL1).

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