GBP/JPY plummets below 154.00 on BoE dovish monetary policy stance

• The British pound collapsed 300 pips, down to 153.00 on a BoE’s decision to keep rates unchanged at 0.10%.
• The BoE decision lies on the back of a weaker labor market, as the furlough program ended in September.
• GBP/JPY: The 153.50 key support/resistance area, a daily close above, would keep bulls in control, otherwise the bears.

The GBP/JPY is plummeting, down 1.50%, trading at 153.56 during the New York session at the time of writing. The market sentiment is upbeat, as the Federal Reserve said it would start reducing bond asset purchases on $15 billion by the middle of November while pushing back higher interest rates. Investors used that as a signal to keep pushing equities at all-time highs, while in the FX market risk-sensitive currencies, drop against the greenback.

Back to the GBP/JPY, on Thursday, the Bank of England (BoE) Monetary Policy Committee (MPC) decided to keep rates unchanged at 0.10%, despite that some members, including BoE Governor Bailey, expressed concerns about high inflation in weeks before the meeting. 

The reason to keep the rate unchanged is that “It will be necessary to raise bank rate over coming months if data, especially jobs, is in line with the forecast,” according to the MPC statement. Moreover, they added that the “MPC still sees value in waiting for official labour market data after end of furlough, before deciding on tightening policy.”

Concerning asset purchases, the bank stayed put at 895 billion of Sterling. Regarding high inflation levels, the BoE “forecasts inflation to peak of 4.80% in Q2 2022.” Further, the UK’s central bank forecasts show inflation in two years at 2.23%, based on market interest rates.

GBP/JPY Price Forecast: Technical outlook

Daily chart

The GBP/JPY Thursday’s price action depicts that investors were heavily-positioned towards a BoE rate hike, but the British pound collapsed as the BoE disappointed. The Average Daily Range (ADR) of the day is 300 pips, as the GBP/JPY dropped from 156.00 towards 153.00.

It is worth noticing that the pair briefly closed to the 50-day moving average (DMA) at 153.00 and bounced off, as the market found buyers around that level. However, if GBP/JPY bulls would like to keep in control, they would need a daily close above the July 29 high at 153.50. In that outcome, a renewed test towards 154.00 is on the cards.

On the flip side, failure at the abovementioned would open the door for another 153.00 challenge. A break of the latter would open the door for further losses, exposing the 100-DMA at 152.60, followed by the 200-DMA at 151.74.