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GBPJPY: The GBP/JPY pair slid in the overnight as muted inflation figures from Britain coupled with a strong response by investors to flee to the Yen sent the pair to its lowest level in two weeks. The British producer price input index for February gained 1.1 percent, lower than the median forecast of 1.5 percent. Furthermore, the producer price index output core gained 3.1 percent during this same time period, versus expectations of 3.4 percent. With inflationary pressures within the Bank of England’s medium-term band, policymakers could ease off the hawkish rhetoric, maintaining quantitative easing as the British economy struggles to find footing.
Taking a look at price action, key resistance looks to be in place at the 100-SMA at 131.223, while recent fundamental developments have painted a clear bearish picture for the GBP/JPY pair. Most recently, the pair succeeded in breaking its 50.0 Fibo retracement on the August 3 to December 30 move. With the pair trading below its 20-SMA, 50-SMA, and 200-SMA, a clean break of the 100-SMA could result in further sharp losses by the GBP/JPY pair.
Written by Christopher Vecchio, DailyFX Research.
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