GBP/JPY trades at 1-week high, BOJ eyed

GBP/JPY has extended overnight gains in Asia to 141.91; the highest level since June 9. The BOJ is expected to keep rates unchanged and reiterate that it will continue with its massive stimulus until inflation moves near the 2 percent target.

BoE dissenters drive Gilt yields higher

The markets were caught off guard by the 5-3 vote split at the BoE on Thursday. The 10-year gilt yield recovered sharply from the low of 0.926% to end the day higher one basis point at 1.04%. The daily chart of the 10-year Gilt yield now shows a bullish engulfing/outside day candle.

Despite the uptick in the yields, the GBP/USD pair ended on a flat note at 1.2753, suggesting the market does not see hawkish vote split actually translating into a rate hike.

Nevertheless, the GBP/JPY pair jumped to 141.58 on Thursday and extended gains to 141.91 in the Asian session today.  The rally in the cross is largely due to the broad based  weakness in the Yen seen following the Fed’s hawkish rate hike.

Traders await BOJ rate decision. Though nothing major is expected, one should not rule out the possibility of Kuroda detailing a potential QE exit strategy, given the BOJ balance sheet has ballooned to unprecedented and unsustainable levels.

GBP/JPY Technical Levels

A break above 141.87 (June 5 low) would open up upside towards 142.50 (50-DMA) and 142.77 (June 8 high). On the other hand, a breakdown of support at 141.26 (100-DMA) could yield a sell-off to 140.72 (June 6 low) and 140.50 (5-DMA). The daily MACD is about to turn positive,while the RSI is hovering at neutral levels.