GBPJPY has formed higher highs and higher lows, creating a rising wedge pattern visible on its daily time frame. Price is approaching the peak of the chart pattern, so a breakout could take place sooner or later.
The 100 SMA is above the longer-term 200 SMA on this chart, so the path of least resistance could be to the upside. The short-term moving average is around the bottom of the wedge, adding to its strength as support.
However, stochastic is turning lower from the overbought area to signal a pickup in selling pressure. A breakout in either direction could lead to a move of around 2,500 pips or the same height as the chart pattern.
There are plenty of economic events in the UK this week, including today’s CPI release. Headline inflation is slated to hold steady at 3.0% while core CPI could also stay unchanged at 2.7%. Jobs data due on Wednesday could show a smaller increase of 0.4K in claimants and a pickup in the average earnings index, which would also be a positive sign for inflation.
Later on, the BOE will announce its monetary policy decision. No actual changes to interest rates or asset purchases are expected, so traders will pay closer attention to the minutes of the meeting and how policymakers would vote.
As for the yen, the Japanese currency has been mostly reacting to market sentiment and bond yields these days. Rising US bond yields on the heels of a potentially upbeat FOMC statement and tax reform progress are keeping a lid on yen gains.