GBP/JPY has remained stuck within recent ranges on Thursday, unable to surpass or even test weekly highs in the 154.10-20 area and finding good support below 153.50. FX market conditions have been tame on Thursday amid a lack of US market participants, with markets there closed for Thanksgiving. The pair continues to trade close to its 50-day moving average, which currently resides around 153.60. On the day, the pair trades broadly flat, despite further Brexit jawboning by the UK regarding triggering article 16 of the Northern Ireland protocol and despite news that French fishermen will be taking action to block UK/EU trade via sea and the channel tunnel on Friday.
Remarks from Bank of England Governor Andrew Bailey earlier in the session, who said that the supply chain problems causing inflation should be temporary, were broadly ignored by FX markets. Bailey added that the risk is that inflation expectations become embedded and, before noting that we have a very tight labour market in the UK. Policy guidance is more hazardous to give in times of elevated uncertainty, he said.
Technicians will note that over the past three days, GBP/JPY has formed a pennant structure. A break on the upside would likely see prices move back towards the 17 November highs on the 154.700s, while a break to the downside would open the door to a move towards recent lows around 152.50. This area also coincides with the 200DMA, and thus might present a good entry point for the dip buyers.
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