GBP/JPY recovery stalls below 185.55 as risk appetite fades

• The Sterling stalls below 185.50 with the upside trend intact.
• Hopes of a dovish BoJ are likely to weigh on the Yen.
• Investors await the release of key UK indicators this week.

The Sterling is trading higher against the Japanese Yen on Monday, although bullish momentum has faded at the mid-range of 185.00 during the London morning session as the market mood deteriorated.

In the absence of key macroeconomic releases today, the risk appetite that had fuelled the Pound’s recovery from Friday’s lows at 184.85 has waned on Monday, giving some oxygen to the safe-haven Yen.

Key UK macroeconomic releases ahead

JPY bulls, however, are likely to remain subdued. The weak Tokyo CPI and wage growth data seen last week have boosted expectations that the Bank of Japan will maintain its ultra-loose policy after next week’s meeting, which is acting as a headwind for the Yen.

In the UK we have a busy calendar this week, starting with the employment report on Tuesday, consumer prices on Wednesday and the  Retail sales figures on Friday.

In Japan, all eyes will be on Thursday’s National CPI data for confirmation of the deflationary trend anticipated by the Tokyo inflation reading. The risk of the Yen is skewed to the downside.

The pairs’ broad trend is bullish, with downside attempts seen as good entry options for bulls. Above 185.55 the next resistance is 186.16. Supports are at 184.48 and 182.70.

Technical levels to watch