EUR/GBP rallies on worse-than-expected final Q3 GDP data while USD/JPY holds

EUR/GBP continues to surge towards its £0.8828 November peak

EUR/GBP’s advance is ongoing with the cross now flirting with its £0.8780 21 October high and heading towards the £0.8828 November peak as final Q3 UK GDP comes in at a worse-than-expected -0.3% versus an estimated -0.2% and 0.2% in Q2.

The area between £0.8780 and £0.8828 is expected to cap the currency pair this week but, should this not be the case, the mid-October high at £0.8867 would be targeted next.

Immediate support comes in at Thursday’s £0.8769 low and more significant intraday support between the 15 and 19 December highs at £0.8737 to ££0.8729. While the 19 December low at £0.8691 underpins, the mid-December uptrend remains intact.

USD/JPY hovers above its 5-month low

USD/JPY’s sharp appreciation versus the US dollar on the back of this week’s Bank of Japan (BoJ) meeting in which it caught market participants by surprise when it announced that it would be widening the band around its yield target to 0.50%, took the cross to a 5-month high close to the ¥130.00 region.

Part of this move allows its 10-year bond yields to rise to 0.50%, which is an upward adjustment from the previous upper limit of 0.25% and has been construed as laying the groundwork for an eventual rise in interest rates and pushed the Japanese yen to ¥130.58.

Over the past couple of days, the cross has been trading in a tight range above this low and is expected to continue to do so for the rest of this week.

Only a slip through ¥130.58 and the ¥130.41 August trough would put the minor psychological ¥130.00 mark on the plate while good resistance can be spotted between the early December and last week’s lows at ¥133.63 to ¥134.52.