GBP/JPY declines amid speculation of ongoing ‘Yenterventions’ from BoJ

• GBP/JPY tumbled back to 203.00 as markets suspect continued market intervention.
• The Yen soared a full percent against the Pound Sterling on Wednesday.
• This follows last week’s 2% sudden decline and a surge in BoJ spending.

GBP/JPY continued a pattern of sharp declines on Wednesday, tumbling over a full percent on the day as markets continue to suspect further direct intervention spending in an attempt to bolster the battered Yen.

According to reporting by Bloomberg, it is suspected that the Bank of Japan (BoJ) overspent on market operations to the tune of ¥2.14 trillion last Friday after week-on-week current account figures wildly overclocked money broker forecasts. No official statements from Japanese officials are expected, but if Wednesday’s extended downswing and last Friday’s Yen surge were a result of policymakers stepping into FX markets, it would represent the third and fourth instances of Yen defending just in 2024.

The Yen remains a deeply bearish currency that has become a sell-side favorite across the global fx markets. Even the Guppy’s -2.44% five day decline leaves GBP/JPY trading at 16-year highs, and direct market intervention is becoming increasingly expensive for Japan, a country with an already hefty debt ratio.

UK labor data, Japanese national CPI inflation numbers in the barrel

UK Producer Price Index (PPI) figures released early Wednesday did little to support the Pound Sterling with PPI inflation contracting 0.3% MoM in June, down from the previous revised 0.0% and entirely reversing direction on the forecast uptick to 0.1%.

UK labor data is in the barrel for Thursday, which is expected to show a sharp decline in unemployment claims. Claimant Count Change figures in June are forecast to ease to 23.4K from the previous 50.4K, and a misfire in the headline unemployment figure could shred further support for the GBP.

Japanese National Consumer Price Index (CPI) inflation is due on Friday, and while June’s annualized CPI inflation print is expected to tick up to 2.7% from the previous 2.5%, the figure is unlikely to be a strong enough inflation print to spark a topside move in interest rates from the BoJ. Japanese National CPI inflation figures are also forecast by Tokyo CPI inflation data which releases several weeks earlier, so market effects at the print tend to be muted.

GBP/JPY technical outlook

The Guppy 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.

GBP/JPY hourly chart

GBP/JPY daily chart