GBP/JPY Breaks Crucial Support Ahead of BoE Rate Decision

Key Highlights

  • GBP/JPY declined below a crucial support at 132.00.
  • GBP/USD failed to recover above 1.2500 and resumed its decline.
  • The BoE Interest Rate Decision will be announced today (forecast – no change from 0.1%).
  • The US Initial Jobless Claims for the week ending May 02, 2020 could decline from 3839K to 3000K.

GBP/JPY Technical Analysis

This past week, the British Pound formed a significant top near 135.50 against the Japanese Yen. GBP/JPY broke many key supports near 133.50 and 132.50 to enter a bearish zone.

Looking at the 4-hours chart, the pair followed a bearish path from well above 135.00 and settled below both the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

There was a break below the 76.4% Fib retracement level of the upward move from the 131.93 low to 135.44 high. Besides, the pair traded below a major bullish trend line at 132.70 and then broke a crucial monthly support at 132.00.

It seems like the pair might continue to decline towards the 130.00 level or the 1.618 Fib extension level of the upward move from the 131.93 low to 135.44 high.

Any further losses could open the doors for a larger decline towards the 128.00 support. If there is an upside correction, the pair could find a strong resistance near 132.00 and 132.50 (the recent breakdown support zones).

Fundamentally, the UK Construction PMI report for April 2020 was released by the Chartered Institute of Purchasing & Supply and Markit Economics. The market was looking for a decline from 39.3 to 22.0.

The actual result was disappointing as the UK Construction PMI declined sharply from 39.3 to 8.2, indicating by far the fastest decline in construction output.

The report added:

The latest reading was the lowest since data were first collected in April 1997. The previous record low was 27.8 in February 2009.

Overall, GBP/JPY is likely to continue lower towards 130.00 or even 128.00. Looking at GBP/USD, the pair failed to recover above 1.2500 and extended its decline below 1.2400.

Upcoming Economic Releases

  • BoE Interest Rate Decision - Forecast 0.1%, versus 0.1% previous.
  • US Initial Jobless Claims - Forecast 3000K, versus 3839K previous.