GBP/JPY – Slides as BoE Disappoints

How much further will it fall?

The pound plunged on Thursday after the Bank of England left interest rates unchanged and gave the impression future hikes won’t be as aggressive as markets had anticipated.

For weeks, the pound has performed well and traders priced in one hike this year and at least a few next. But it seems they may have to reconsider and that started today.

The pound has slipped against the yen, breaking below the descending channel that it had traded within the last couple of weeks as it pared previous gains.

The acceleration of the decline is potentially a signal that this is more than a correction in a broader uptrend. The test of this will be whether it breaks key support around 152.50-153.50, where the 50 and 61.8 fib levels combine with the 55/89-day SMA band and prior resistance.

A rotation off here could be a bullish signal in the longer term, while a move below may suggest traders got carried away in the run-up to today’s meeting.

That doesn’t mean we’ll settle back in the June-early October ranges as the BoE still looks likely to raise rates at least a few times. But it may be a while before we’re scaling the highs of a few weeks ago, again.

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