Chart of the day - GBPJPY (05.08.2021)

Monetary policy decision announcement from Bank of England at 12:00 pm BST is a key macro event of the day. BoE is expected to leave rates unchanged. Market consensus expects settings of QE programmes to be unchanged as well. Attention will be on how votes split - some BoE members sounded hawkish recently but it is uncertain how the departure of BoE Chief Economist Haldane will impact the hawks' camp (Haldane was a known hawk). Bank of England is likely to use rising Delta case count as an excuse to maintain loose policy. Investors will also look at whether guidance on QE has changed. Current target assumes purchases of 895 billion GBP worth of assets by the end of the year.

Taking a look at the GBPJPY chart, we can see that an important technical pattern is building up. An inverse head and shoulders structure can be spotted on the chart, with 153.10 area serving as a neckline of the pattern. This zone is additionally strengthened by the 50-session moving average (green line) as well as the downward trendline, and should be viewed as the key near-term support. Breaking above would hint at a possibility of realizing the target of the breakout from the pattern. Should it be executed in a textbook manner, the pair may test 2018 peaks in 156.60 area.

Source: xStation5