Today, dollar pairs are extremely risky to trade. The intrigue of the September meeting of the Fed keeps the risk of strong volatility and impulse price jerks. The economic forecast of the Fed and the position of Janet Yellen will in many ways clarify the situation regarding the prospects for monetary policy, after which the US currency will be determined by a further vector of the movement. In the meantime, the trade in dollar pairs is more like a lottery game, which is guided by luck rather than calculation.
Therefore, today I propose to consider a cross-pound / yen pair, on which an interesting situation has developed. Strong figures of English statistics, the expectation of an increase in the rate of the Central Bank and the position of the deputies of the British Parliament make the pound quite attractive currency. The antipode here is the yen, which has become cheaper for the second week amid a decline in geopolitical tensions around North Korea. By and large, the fundamental picture of the pair GBP/JPY is clear and understandable. The pound on the "hawkish" rumors will continue to strengthen, and the yen will drift in anticipation of a new surge of political nervousness. But such an algorithm can be violated by the Central Bank of Japan, which will hold its regular meeting tomorrow. Moreover, this meeting will be the first for two new members of the managers who took the place of the retired.
In general, none of the strategists of large banks expect the Bank of Japan to make any significant changes. The economic situation in the country does not require the use of emergency response measures, despite the weak key indicators. For example, inflation is already at the zero level for the third month (in annual terms - for the third consecutive month at around + 0.4%), Japan's GDP has slightly increased (+ 0.6%), while unemployment stands at 2.8%. In other words, it is not catastrophic, but good is not enough. Of the positive moments, the growth of business sentiment in the country and a steady consumer demand. Despite the threat of a military conflict with North Korea, Japanese businessmen are optimistic about their prospects. However, the key indicators of the Japanese economy is weakly affected. In addition, today it became known about a sharp increase in exports (+ 18%) and imports (+ 15%). This is the strongest growth dynamics in the last four years.
In other words, there are no reasons for mitigating the monetary policy conditions for Harukiko Kuroda, especially if he did not do it earlier, when inflation was many months below zero, and the yen was paired with the dollar in the hundredth figure area. At the moment, the situation has somewhat leveled off and in many aspects is in the stage of stagnation.
At the same time, the Bank of Japan tomorrow can change the target level of yield on 10-year bonds or announce this step. The yield on Japanese securities is constrained by the policy of the Central Bank, and this fact, in particular, exerts pressure on the national currency. Nevertheless, the expected changes will not have a significant impact on the yen. The regulator will still keep borrowing costs low.
In the opinion of many experts, new members of the board of the Japanese regulator Suzuki, and Kataoka are also "not to be afraid". In all likelihood, they will vote synchronously with Haruhiko Kuroda. The very head of the Central Bank in early September reported that "a super soft monetary policy will remain for some time." Since then nothing has happened that could radically change his opinion.
Thus, tomorrow's meeting of the Japanese regulator, in fact, will not change anything. The yen will continue to focus on external fundamental factors that will determine the demand for currency. Speaking directly about the GBP/JPY pair, in the conditions of a temporary geopolitical "calm" the accents will shift to the British events. Today's data on retail sales, which were much higher than expected, again increased the likelihood of tightening monetary policy in Britain. In November or December, the English regulator is likely to raise the interest rate and until this moment, the British will only increase their positions.
Technical analysis also confirms the priority of the northern movement. And on all the "senior" timeframes. So, on the weekly and monthly charts, the indicator Ichimoku Kinko Hyo formed a strong bullish signal "Line Parade", which confirms the northern trend, and the price itself is on the upper line of the indicator Bollinger Bands. On a monthly chart, the price has crossed the middle line of this indicator, which also increases the potential for price growth.
True, on the timeframe MN the price remains under the pressure of the cloud Kumo, however in the medium term, all signals speak in favor of bulls GBP/JPY. The nearest levels of support are the marks of 146.40 (the Tenkan-sen line on D1) and 145.25 (the Tenkan-sen line on W1). But the price target is at around 156.20, this is the lower boundary of the cloud Kumo on the monthly chart.
