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The British pound hit a 6-year resistance at 164.021 on Thursday as inflation statistics rise to a 30-year high. The UK inflation statistics hit a 6.2% rise on Wednesday, a figure seen in 30-years while the BoE indicates they are more worried about economic growth than inflation in the near term.
BoE increased the interest rate by 25bps in the last policy meeting in a bid to slow soaring inflation as Ukraine/Russia war causes energy supply jitters.
The rising interest rate environment has caused a policy divergence as BoJ remains neutral undermining the yield-sensitive Japanese yen in the near term.
Early Friday, the Japanese Yen was firmer as Tokyo Core CPI(YoY) for March came out better than expected rising to 0.8% from the 0.4% expected indicating continued economic recovery post-Omicron virus seasonal attacks.
The GBPJPY pulled away from a critical resistance plunging -0.70% during the European session opening as the pound gets knocked down by negative retail sales for February.
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Early Friday morning, GBPJPY sharply dropped from 161.432 resistance as bulls lose stream at the convergence of strong resistance areas. There is a near-term resistance at 161.400 which coincides with May 2016 highs and an upside movement is currently capped by a rising wedge pattern indicating reversal areas for the GBPJPY.
Bulls enjoyed the carry trade to the upside however a price correction can be experienced as they face a convergence of strong resistance.
However, if the price manages to break above the near-term resistance at 161.400 bulls may target 164.354. Traders may need to pay attention to the developments in Ukraine as they are pivotal to the direction of the pair in the near term.
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The GBPJPY closed above a critical wedge pattern as bulls drove for a 161.40 near-term resistance before quickly trading back inside the reversal pattern, early Friday morning.
The price reaction in the area indicates that the trend may be due for a correction after a 14-day rise.
Potential pullbacks may target 158.00 near-term resistance turned support and traders should watch out for a break above near-term resistance at 161.400 may mean further upside in the near term.
