GBP/JPY gains ground on optimistic British Manufacturing PMI
- The GBP/JPY cross jumped above the 183.60 area on Monday, still in its highest level since 2015.
- British Manufacturing PMI saw a contraction but lower than expected giving the Pound traction.
- Japanese Takan Index came in better than expected, still the BoJ may remain dovish.
At the start of the week, the GBP/JPY gained ground on releasing the Manufacturing PMI from the UK, which contracted but below expectations. In that sense, rising British yields traction the Sterling while the Yen is still vulnerable amid the Bank of Japan’s (BoJ) dovish stance. Despite Takan indexes improving in Q2, BoJ officials may need more evidence to pivot.
The UK reported a better than expected Manufacturing PMI
The S&P Global/CIPS Manufacturing PMI for the UK in June recorded a reading of 46.5, higher than the previous figure of 46.2. As a reaction, British yields saw more than 1% increases, with the 2,5, and 10-year rates jumping to 5.35%,4.73% and 4.44%, respectively.
In Japan, the Tankan Large Manufacturing Index for Q2 exceeded expectations, reaching 5 compared to the consensus of 3 and the previous reading of 1. The Tankan Large Manufacturing Outlook for Q2 also showed a notable improvement, reaching 9 versus the consensus of 5 and the previous reading of 3. While these positive figures suggest a strengthening economy, the Bank of Japan (BoJ) may require further evidence of robust economic activity before considering a shift in its dovish monetary policy stance. Meanwhile, its likely that the Yen will continue to weaken agains most of its rivals.
GBP/JPY Levels to watch
The daily chart suggests that the outlook favours the GBP para the cross still shows overbought conditions since mid-June. In addition, the Moving Average Convergence Divergence (MACD) shows signs of exhaustion of the bullish momentum while the Relative Strength index remains steady above 70.
In a downward correction, the next support levels are seen at 183.15, followed by 183.00 and 182.00. On the upside, resistances levels to monitor line up at 183.70, 184.00 and 185.00.
