The GBPJPY currency pair dipped on Wednesday after the release of Bank of Japan (BoJ) meeting minutes, where the bank surprised markets by making its yield curve control (YCC) more flexible. The BoJ said it would allow the 10-year yield to move above the cap as long as it stays below 1.0% rather than being capped at 0.5%.  

The BoJ’s comments on Wednesday that it is not considering an exit from monetary easing also helped to support the GBP/JPY pair. The BoJ’s Deputy Governor Shinichi Uchida said that the central bank is “patiently continuing with monetary easing” and that it will “nimbly respond to both upside and downside risks.” This move was seen as a sign that the BoJ was becoming less tolerant of higher yields, and it weighed on the Japanese Yen.  

The BoJ’s decision is likely to have a limited impact on the pair in the short term. However, it could put pressure on the Yen in the longer term if it leads to higher yields. 

Technical 

According to the 4-hour chart, the pair trades under firm bearish pressure during the session, with the price action comfortable under the daily pivot point. However, the upwards path could offer the least resistance to the pair, with the 50-EMA (blue line) and 23.60% Fibonacci retracement level likely to offer significant support to the price action in the short term.  

Therefore, a break below the level would bring the 180.812 and 179.772 support levels into play as the price action moves towards the 61.80% Fibonacci retracement level. However, should the bulls regain control, short-term trading opportunities could exist as the price action looks to retest the resistance level at 183.248. A push above the level would leave the next resistance level located at the 184.004 price level as a potential level of interest. 

Summary 

Although the pair experienced a significant pullback during the session, the outlook remains slightly bullish, leaving the 50-EMA and 23.60% Fibonacci retracement level as potential support. Therefore, should the price action maintain a position above the levels, positive momentum offers opportunities to the 183.248 resistance level and 184.004 next.  

Sources: TradingView, Reuters, Trading Economics, CNBC.