The Pound continued its strong uptrend and was seen nearly 1% stronger Tuesday, trading above the key short-term support.
UK stands behind its workers
On Monday, news appeared that Chancellor Rishi Sunak was preparing to raise the national living wage to 9.50 GBP per hour as part of Wednesday’s budget, giving British workers an extra 1,000 GBP per year.
The national living wage – the national minimum wage for anybody over the age of 22 – will increase from 8.91 GBP per hour, while Britons aged 21-22 will see an increase to 9.18 GBP an hour from 8.36 GBP, and apprentices 16 and over and not in full-time education will get a rise to 4.81 GBP from 4.30 GBP an hour.
“This is a government that is on the side of working people,” Sunak said.
There are no UK macro data on the schedule this week. Thus, traders might focus on the US macro news, usually causing volatility in the major USD pairs but moving FX crosses as well.
On Wednesday, US durable goods for September will be released and are expected to weaken notably . Additionally, Thursday will see the US GDP for the third quarter, forecast to drop significantly to 2.5% annually, down from 6.7% previously.
The final day of the week will belong to the US PCE inflation indices – the Fed’s favorite tool of measuring inflation. Inflation is expected to rise further to 4.7% year-over-year, more than double the current Fed’s target of 2.0%.
Bank of Japan decision due
From the Japanese Yen point of view, Thursday will bring the Bank of Japan monetary policy . The BoJ remains ultra dovish, and it will likely reiterate that it is ready to lose monetary policy further, possibly undermining the JPY.
Friday will bring a large batch of JPY data, such as the unemployment rate, industrial production, housing starts, construction orders, Tokyo CPI, etc.
Bulls remain in charge
Technically speaking, the daily chart remains bullish. This week’s minor correction brought the price to previous cycle highs at 156.00, now acting as significant short-term support. As long as sterling trades above it, the short-term uptrend remains intact.
However, if the GBP/JPY cross declines below 156.00, larger stop-losses of long positions could be hit, likely driving the Pound toward its 50-day moving average, currently in the 152.50 zone.
On the upside, the resistance is now seen at the cycle top – near 158.00 . If taken out, the cross could continue toward the psychological level of 160.00.