Source: Forex Analysis
During Tuesday’s trading session, investors’ eyes were turned towards the British Pound due to a publication of inflation data in the United Kingdom. This release was particularly awaited by the market participants after the Bank of England signaled a possible faster pace of interest rate hikes. It turned out, the CPI inflation was higher than expected by market consensus. The consumer price and services index stabilized in January at 3.0% y/y against expected drop to 2.9% y/y. In turn, core CPI inflation increased more than anticipated – to 2.7% from 2.5% per annum. On the other hand, PPI inflation decelerated slightly. The above data together with better prospects for the British economy support expectations for the start of a cycle of monetary policy tightening by BoE. Risk aversion and uncertainty surrounding Brexit negotiations now have a greater impact on the Pound than CPI data.
Let’s now take a look at the GBP/JPY technical picture at the H4 time frame. The market has tried to rally after the data was released, but dropped eventually to test the recent technical support at the level of 148.90. It is worth to notice, that the market conditions are now oversold and there is a clear bullish divergence forming between the price and the momentum indicator, which might spark a bounce towards the nearest technical resistance at the level of 150.44 and above.
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