GBP/JPY stalls around 158.00 on weaker UK's CPI reading
- GBP/JPY stalls around 158.00 on a softer than expected UK inflation reading.
- A risk-on market mood boosts the prospects of the risk-sensitive British pound.
- GBP/JPY: The pair is tilted to the upside, but any lower corrections might be good opportunities for buyers.
The GBP/JPY stalls its upward trend around 158.00, either way, it climbs 0.10% during the New York session, trading at 157.95 at the time of writing. The market sentiment remains positive, even though central banks are looking to normalize monetary policy conditions, higher energy prices, and the Federal Reserve bond taper announcement.
The British pound slid on Wednesday following the UK CPI release, which showed that the Consumer Price Index for September rose by 3.1% annually, lower than the 3.2% foreseen by analysts. Furthermore, the UK Core CPI, which excludes volatile food and energy prices, decelerated to 2.9% on a yearly basis, lower than the August reading of 3.1%.
Despite the lower inflation reading, the market still expects the Bank of England (BoE) to hike interest rates before the year's end, ultimately giving a lift to the GBP/JPY as the pair tumbled below 158.00.
That said, and if the Bank of England hiking rates prospects remain on investors' minds, the British pound could appreciate more in the following days.
GBP/JPY Price Forecast: Technical outlook
Daily chart
The GBP/JPY upward trend is overextended, as depicted by the Relative Strength Index (RSI), a momentum indicator at 78 within the overbought area, indicating that the pair might correct before resuming the ongoing trend. However, as long as the daily moving averages (DMA's) remain well below the spot price, this favors the British pound.
In case of a correction lower, there could be some dip buyers around the October 18 low at 156.60, immediately followed by the May 27 high at 156.07.
On the other hand, if the GBP/JPY rally extends, a daily close above the 157.00 psychological level could open the way for a 158.00 test.