Yesterday’s trade saw GBP/JPY within the range of 191.02-192.20. The pair closed at 191.85, dipping 0.14% on a daily basis and marking a third consecutive daily loss. The daily low has also been the lowest level since July 14th, when the cross registered a low of 190.53.
At 9:31 GMT today GBP/JPY was up 0.62% for the day to trade at 192.96. The pair broke the daily R1 and R2 levels and touched a daily high at 193.04 at 9:18 GMT. It has been the highest level since July 23rd, when a daily high of 193.97 was reached.
Fundamentals
United Kingdom
Preliminary Gross Domestic Product comes in line with expectations
GBP/JPY gained ground to reach a daily high at 192.61 following the release of the GDP report by the UK Office for National Statistics at 8:30 GMT. The preliminary estimate of United Kingdoms GDP showed that economy expanded at a rate of 2.6% during the second quarter of 2015 compared to the same period a year ago, which came in unison with the median forecast. It has been the lowest annual rate of growth since Q3 2013, when the GDP expanded at a pace of 1.9%. UK economy grew at an annualized rate of 2.9% in the first quarter of 2015, according to final data released on June 30th. The latter was a revised up estimate from 2.4% (the 2nd GDP estimate), with the main reason being the introduction of the interim solution for the Construction and Cost Price Indices, which have influenced both the construction industry and gross fixed capital formation estimates.
In annual terms, household expenditures have been on the rise since the fourth quarter of 2011, while being 3.4% higher in Q1 2015 compared to the same quarter a year ago. Gross fixed capital formation expanded 5%, total exports climbed 3.8% and imports rose 4.6% year-on-year in Q1, according to data by the Office for National Statistics.
On a quarterly basis, the preliminary estimate of UK GDP showed a 0.7% growth during Q2 2015, after in Q1 economy expanded at a rate of 0.4%, according to final data, released on June 30th. The final quarterly GDP estimate was a revision up from the preliminary and the 2nd estimates, which both pointed to a 0.3% growth.
Japan
Retail Sales
Annualized retail sales in Japan probably rose 0.5% in June, according to the median forecast by experts. If so, this would be the third consecutive month of sales growth. In May retail sales increased at an annualized rate of 3.0%. This is a short-term indicator, which provides key information about consumption on a national scale. Higher retail sales suggest stronger consumer demand, confidence and economic growth, respectively. Therefore, a larger-than-anticipated rate of growth would have a bullish effect on the yen. The Ministry of Economy, Trade and Industry is expected to release the official data at 23:50 GMT.
Bond Yield Spread
The yield on Japanese 2-year government bonds went as high as 0.007% on July 27th, after which it slid to 0.006% at the close to remain unchanged on a daily basis.
The yield on UK 2-year government bonds climbed as high as 0.616% on July 27th, after which it fell to 0.611% at the close to lose 0.008 percentage point compared to July 24th.
The spread between 2-year UK and 2-year Japanese bond yields, which reflects the flow of funds in a short term, shrank to 0.605% on July 27th from 0.613% on July 24th. The July 27th difference has been the lowest one since July 16th, when the yield spread was 0.598%.
Meanwhile, the yield on Japan’s 10-year government bonds soared as high as 0.419% on July 27th, or the highest level since July 23rd (0.422%), after which it slid to 0.412% at the close to lose 0.003 percentage point compared to July 24th, while marking a second straight day of decrease.
The yield on UK 10-year government bonds climbed as high as 1.940% on July 27th, after which it slipped to 1.937% at the close to lose 1 basis point (0.01 percentage point) on a daily basis, while marking a fourth consecutive day of decrease.
The spread between 10-year UK and 10-year Japanese bond yields narrowed to 1.525% on July 27th from 1.532% on July 24th. The July 27th yield difference has been the lowest one since July 8th, when the spread was 1.443%.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 191.69. In case GBP/JPY manages to breach the first resistance level at 192.36, it will probably continue up to test 192.87. In case the second key resistance is broken, the pair will probably attempt to advance to 193.54.
If GBP/JPY manages to breach the first key support at 191.18, it will probably continue to slide and test 190.51. With this second key support broken, the movement to the downside will probably continue to 190.00.
The mid-Pivot levels for today are as follows: M1 – 190.26, M2 – 190.85, M3 – 191.44, M4 – 192.03, M5 – 192.62, M6 – 193.21.
In weekly terms, the central pivot point is at 192.58. The three key resistance levels are as follows: R1 – 193.55, R2 – 195.02, R3 – 195.99. The three key support levels are: S1 – 191.11, S2 – 190.14, S3 – 188.67.
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