UK equity markets saw noticeable price action on Monday as the sell-off in 10-year Gilts and the British pound finally took a break. However, with market-moving data on tap on Tuesday, traders could be in for a wild day. UK inflation reports are anticipated to show that price pressures continued to ease back during the month of May, with CPI estimated to hit 2.6 percent and RPI forecasted to slip to 4.3 percent. Nevertheless, even those figures are lofty, especially as the Bank of England’s official inflation target is well below at 2.0 percent. Furthermore, BOE Governor Mervyn King recently expressed an even more hawkish tone during a speech given in Wales, in which he said that the BOE “may need to take further action” on inflation as expectations have “drifted up.” As a result, CPI figures confirming King’s commentary will really ramp up speculation of a July hike by the central bank. On the other hand, if inflation reports actually hit the tape at softer-than-expected levels, the BOE will be more likely to continue watching pricing and capacity data in order to assess whether policy tightening will be necessary in August.


The buying point of GBP/JPY is at 239.85; triggered by a continuation of an uptrend and failure to form a lower support then the previous support 239.81.

- Fibonacci retracement at 61.8% is the take profit at 241.00
- Fibonacci retracement at 38.2% is the Stop Loss at 239.19

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of the two moving averages below the zero line, the shorter term moving average is faster than the long term and it breaks the zero line with high volume. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI, we can determine that it is in an uptrend.

The zero line of the Momentum is very important to understand the strength of the market and as we see on the graph; it breaks the zero line and moves upwards. We should look at the Fibonacci fan; and in this example it touched the first line and the breaking of the line will reach the second.
For Stochastic oscillator we can determine the strength of the buyers, and it gives us a bullish signal about the demand of the market.

Most of the indicators show us the strength of GBP against the Yen and the continuation of an uptrend.

By Finotec’s professional analyst,
Tony B.

dealingdesk@finotec.com