GBP/JPY Signals & Technical Analysis
About the GBP/JPY (British pound sterling and Japanese yen)
The GBP/JPY pair is the abbreviated term used for the Great British Pound and Japanese yen. the Great British Pound and Japanese yen, nicknamed as “Guppy” Before we get into the particulars, what exactly does GBP/JPY rate mean? The exchange rate tells you how many Japanese yen (the quote currency) are required to purchase one Pound (base currency). For example, if the pair is trading at 145.77, it means it takes 145.77 euros to buy 1 pound.
Breaking Down ‘GBP/JPY’
The pound sterling (symbol: £; ISO code: GBP), commonly known as the pound and less commonly referred to as sterling is the official currency of the United Kingdom At different times, the pound sterling was commodity money or bank notes backed by silver or gold, but it is currently Fiat money, backed only by the use of as little as possible in the areas where it is taken.
The unit of the pound sterling is the world's most old money used in a country still in use and which has been in unbroken stretch use since its start.Whereas, the Japanese Yen is classified as a safe haven currency. Before the financial crisis of 2008, several investors would take advantage of ultra-low interest rates from the Bank of Japan to borrow massively in Yen and invest the money abroad.
However, the interest rate differential among the central banks of the BOE and Japan has squeezed significantly considering the global economic downturn, pointing to the unwinding of the carry trade as the value of the Yen rose.The British Pound (GBP) vs. the Japanese Yen (JPY) is an extremely volatile pair.
JPY is usually used as a funding currency of trade because it’s historically a low yielding currency. Since the UK is one of the substantial economies in Europe, the GBPJPY pair can be counted as a substitute for global economic health.On the other hand, this pair acts like a representer for market 'risk-off' actions as the carry trade gets reversed. As a result, GBPJPY is capable to develop strong trends that exceed thousands of pips.
Correlation is merely a mutual relationship or connection between two or more things.Positive correlation – The positive relationship merely is when pairs move in tandem with each other.In the forex world, the GBP/USD, GBP/SGD, EUR/JPY currency pairs are positively correlatedNegative correlation – In contrast, a negative relationship is when forex pairs move in the opposite direction, For example, USD/HUF, EUR/GBP, and USD/CADGold & Japanese yen: This is why there is often a positive one connection between the Japanese money and gold: both properties are less than zero connection with the greenback and both are taken into account safe places of safety.
However, the relation is not an error less connection, as one can see in the map under. This is because gold is not merely a that possibly taking place in addition to the U.S.dollar, but also to the current money-related system based on Fiat money used in countries. as an outcome of that, it some cases the Japanese money and the dollar both come out badly (or profit) get onto land against gold.Economic Events: The movement in the Great British Pound and Japanese yen economic events determine the exchange rates.
Top of the line economic events includes GDP, Employment Change, Industrial Production, and Consumer Price Index. Better than forecast data increases the demand for related currency and impacts the value of either the Great British Pound or the Japanese yen, causing fluctuations in the GBP/JPY exchange rate.
Major Economic Events
Gross Domestic Product – the gross domestic product is the central measure of economic growth in the region.Employment Change – The Sterling is also sensitive to changes in employment, as slacks in the labor market causes a drop in Inflation rates.Consumer Price Index – Since one of the goals of the BOP is to maintain price stability, they keep an eye on inflation indicators such as the CPI.
If the annual CPI deviates from the centralIndustrial Production – This measures a change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. Political Events - Another critical factor is the political aspect.
Instability, as seen in the Brexit referendum, can entirely change the direction of the currencies. So, stay up-to-date on the latest political and economic news.
Key Price Indicators and Events
- The United Kingdom Office for National Statistics reported reducing retail sales by 6.9% during the month of September 2022. Data released by the same organistaion revealed a deeper concern of rising living costs and an imminent economic downturn. A situation that coud have deepened in the wake of U.K’s political turmoil. All of this happenings have exerted a downward pressure on the GBP/JPY.
- A widening divergence in Japan’s monetary policy by the Bank of Japan has prolonged any changes in price action for the Yen. The Bank of Japan has still not shown any possibilities of hiking interest rates and is stil taking a solid stand for its ultra-lose policy. A situation that seems to provide strong support for the GBP/JPY cross. JPY’s use as safe haven could offset any drops in the pair caused by the GBP even amidst a looming global recession.
What Determines the GBP/JPY Exchange Rate?
Several factors can impact the GBP/JPY rate valuation, including:
BOE & BOJ Monetary Policies: The Bank of England and Bank of Japan control the supply of money in the market, to keep the economy on track.
A dovish policy, which is also known as expansionary policy, from either of the central banks, weakens the related currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens the currency.
Assets and Currencies Influencing Price Action of GBP/JPY
- The T-Note or Treasury Note - The T-Note is a marketable United States govt debt security bond with maturity of 2-10 years and a fixed interest rate. Available from the U.S government either on noncompetitive or competitive bid.
- Gilt - The Bank of England issues a debt security called the Gilt.
- GJGB10 - The Japan Generic Government 10Y Yield
- Dow Jones Industrial Average or the DJIA - 30 big publicly owned corporations in the U.S indexed and traded throughout a standard stock market trading session.
- FTSE 100- 100 corporations indexed and listed on the London Stock Exchange.
- Nikkei 225 - The Tokyo Stock Exchange has a stock market index called the Nikkei 225.
GBP/JPY Price Factors - People, Economic Data, Organizations and People
- The Bank of England - Prides itself as an institute of monetary stability, the Bank of England has received admiration as the most reliable central banks globally. The U.K Central Bank acts as a last resort lender and as the government’s bank.
- UK Government, Key officials in the government such as the Prime Minister Liz Truss and the Financial Conduct Authority.
- United Kingdom GDP - UK’s Gross Domestic Product is the total capitalization of final products that are manufactured in the country. It is an indication of how far the economy is moving forward or backward. A better or higher reading has a positive impact on the GBP.
- Bank of Japan - The official central bank of Japan tasked with issuing financial statements and determining interest rates. The bank has got attention worldwide for its low interest rates. For example in 2016, BOJ introduced a negative interest to offset rising consumer prices.
- Japans government, Key officials like the Prime Minister Fumio Kishida, The Japan Financial Services Authority.
The EUR/GBP is traded in amounts denominated in the US Dollar.
Standard lot Size: 100,000
Mini lot size: 10,000
One pip in decimals 0.0001
Pip Value: $8.97