JPY is holding the upper hand over GBP since the price rejected off the 148.00-150.00 area with a daily close. The bearish trend remained non-volatile and carried by the dynamic level as confluence along the way.
Ahead of UK Inflation Hearing report today, GBP is going through corrections against JPY trying to regain momentum at near 136.00. G20 summit is going to be held this week which is likely to call for the promotion of Free Trade among the nations. As Brexit remains a burning issue, it has been making a long-lasting impact on the UK trade relations. It is quite uncertain what is going to happen after the Brexit deadline. Econmists do not rule out a scenario of no-deal Brexit as euroskeptic Boris Johnson is a frontrunner the race for the head of the Britsh government. The UK is due to appoint a new prime minister next month after Theresa May resigned having failed to settle Brexit terms.
On Friday, UK Current Account report is going to be published which is expected to decrease to -32.0B from the previous figure of -23.7B and Final GDP is expected to be unchanged at 0.5%. Moreover, Revised Business Investment is also expected to remain unchanged at 0.5% as not much of investments are expected to take place in the UK.
On the JPY side, this week has a quiet start. Japan is due to release a retail sales report on Thursday. The data has been weak so far this year on a yearly basis with the rate is still above zero. With real wages currently decreasing, it is hard to see much of a pickup on the cards here. May industrial Production is pending on Friday which is expected to increase from 0.6 to 0.7 while the Manufacturing PMIs suggest Japan's economy is facing a downturn. The BOJ is more likely to wait until October to see what the impact of the planned sales tax hike will be before taking any action, a stronger JPY could prompt policymakers to act sooner.
Tomorrow, Japan's Retail Sales report is going to be published which is expected to grow to 1.2% from the previous value of 0.5%. On Friday, Tokyo Core CPI report is going to be published which is expected to edge down to 1.0% from the previous value of 1.1%. Besides, the unemployment rate is expected to be unchanged at 2.4%.
To sum it up, JPY is the stronger currency in the pair. JPY is propped up by optimistic expectaitons for the upcoming economic reports. On the other hand, GBP may still struggle to maintain momentum as the UK economy does not cope well.
Now let us look at the technical view. The technical outlook is currently quite contradictory to fundamentals due to birth of Bullish Divergence, the price is expected to push higher to 140.00 area again before the price tries to continue with the bearish trend. Recently the price has been quite corrective and there is still no valid sign to regain bullish momentum along the way. As the price remains above 134.00 area, there is high chance for the price to climb higher with a target towards 140.00. So, proper trade management is required to continue holding the counter trade against a strong trend.