Pound Could Eke out More Gains against the Yen this Week show Technical Studies

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- GBP/JPY tipped to rise to top of the range

- Continuation pattern, falling wedge also bode positive

- Bank of Japan meeting dominates JPY calendar this week

The Pound is expected to make further gains against the Yen in the week ahead stretching its run higher a little further.

The bigger picture shows the pair rising within a falling wedge pattern, suggesting an upside slant to the technical outlook.

Falling wedges eventually break higher according to technical theory.

Momentum is also bullish, with RSI rising more sharply on the current leg higher than it did on the way down.

GBP/JPY's uptrend within the wedge pattern is also more likely to continue after forming a high probability three-bar continuation pattern (see below) which signals further gains are now highly likely albeit only to the top of the wedge at 147.90.

The ADX indicator in the lower pane is rising in the 20s and this adds more weight to the probability that the set-up is signalling more upside.

A break above the 147.02 highs would provide bullish confirmation of a continuation higher to the upside target.

For GBP/JPY to breakout of the top of the wedge it would require a stronger fundamental driver, such as a firmer promise of a softer Brexit deal or a significant row-back on increasing hints the BOJ may be gearing up to dismantle its heavy stimulus programme.

The Yen: What to Watch

The main event in the week ahead is the meeting of the Bank of Japan (BOJ) on Wednesday, September 19 at 4.00 B.S.T.

At the last meeting in July the Yen rose after the BOJ announced it was easing its policy of controlling the 10-year Japanese government bond yield.  Previously the bank had strictly controlled yields in order to promote profitability in the financial industry. The move to allow yields to rise was seen as a form of de facto monetary tightening.

In July the BOJ kept its broad message more or less the same as it has been for years, apart from the changes to yield curve control. It left the key short-term interest rate unchanged at -0.1 percent, and said it would keep rates extremely low for an extended period of time. The central bank reinforced its commitment to continuing with powerful monetary easing, defying speculations that it might start to dismantle its heavy stimulus measures.

Although growth has remained relatively strong  at 0.7%, a key statistic which had led analysts to believe the BOJ might be planning to do away with stimulus -  wage growth - stalled in July after an unusually big 3.3% rise in June, and this may have taken the pressure off the BOJ feeling like it had to tighten.

The only evidence pointing to the possibility of a withdrawal of stimulus on Thursday are comments from the prime minister Shinzo Abe who recently said the bank's ultra easy policy need not last forever, however, he is a politician and not an official of the central bank so has no direct influence on what it decides to do.

Another key release for the Yen is National Core CPI which is expected to show a 0.9% rise when it is released on Wednesday at 00.50.

The trade balance is expected to show a deepening of the deficit to -469bn Yen in August from a prior reading of -232bn, when it is released at 00.30 on Friday, September 21.

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