GBP/JPY hovers around 182.60, poised for further downside

• The GBP/JPY trades neutral at the 182.60 area as investors continue to consolidate gains.
• The Yen gained traction from positive Retail Sales figures from May, while the British yield’s recovery limits GBP’s losses.
• Eyes on inflation and labour market data from Japan on Friday.

The GBP/JPY pair is trading in a neutral stance around the 182.60 area as investors take a breather and assess their gains. The Japanese Yen has gained traction following encouraging Retail Sales figures from May, while the recovery of British yields has limited the downside for the GBP. The market focus now shifts to the upcoming release of inflation and labour market data from Japan on Friday, which could influence the Bank of Japan’s (BoJ) stance on monetary policy.

The Yen gains ground on strong Retail Sales data

Retail Sales in Japan grew in May, surpassing expectations by 1.3%. This positive momentum followed a revised figure of 1.1% in April, initially reported as a decline of -1.2%. Furthermore, the year-on-year retail sales surged by 5.7%, exceeding the projected growth of 5.2% and reflecting an upward revision from the previously revised 5.1% in April. Its worth noticing, that during the European Central Bank's forum, Kazuo Ueda, the Governor of the BoJ, adopted a cautious stance, emphasising that the underlying inflation still falls short of the bank’s target. Ueda expressed the BoJ's intention to carefully evaluate policy adjustments only when inflationary pressures align with their forecasts.

Given the potential impact of robust economic data on inflationary pressures, market participants will be closely monitoring the upcoming release of the Tokyo Consumer Price Index (CPI) for June and the May unemployment rate. As for now, expectations point to a rise in Tokyo's CPI to 3.8% year-on-year, with the core figure projected to reach 4.4% and unemployment to remain steady at 3.6%.

In the meantime, British bond yields recovered and limit Sterling’s losses. The 2,5, and 10-year yields, rose by more than 2% to 5.24%,4.64% and 4.39%, and as higher bond yields attract foreign investors, the GBP may find additional demand.

GBP/JPY Levels to watch

According to the daily chart, despite buyers taking a breather, the bullish outlook for the cross is still intact. However, the Relative Strength Index (RSI) is still in overbought territory, suggesting that additional downward movements shouldn’t be removed.

Support levels to watch: 181.80,181.00, 180.00
Resistances levels to watch: 183.00,183.50,184.00

GBP/JPY Daily chart