FX Watch: GBP/NZD and GBP/JPY Trend Continuation Plays If U.K. Jobs Beat Estimates

Market expectations seem to be running high for a December BOE cut, but what if the U.K. jobs report posts a strong upside surprise?

Our Event Guide for the U.K. Jobs Report suggests that improvements in consumer sentiment could point to stronger hiring and wage growth, possibly dampening odds of further easing.

Here’s what I’m watching on GBP/JPY and GBP/NZD in this scenario.

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Net Risk-on Environment Scenario: GBP/JPY

Guppy recently busted through its short-term descending trend line as shifting policy expectations for the Bank of Japan (BOJ) and currency intervention jitters appeared to weigh on the yen.

A not-so-hawkish tone in the latest BOJ meeting minutes also added to downside pressure on the Japanese currency early in the week while expectations of the U.S. government shutdown possibly ending soon are stoking some risk-on flows.

Keep an eye out for stronger than expected U.K. jobs data that could restore sterling’s appeal as a “risk” currency, with sticky wage pressures possibly even dampening BOE December cut expectations.

A pullback to the broken trend line support, pivot point level (201.28), and 38.2% Fib ahead of the employment report could attract more buyers, possibly sustaining the rally past the latest highs and onto the next bullish target at R1 (203.49).

Just be sure to stay on the lookout for the occasional tariffs-related headlines or geopolitical developments that could also impact overall sentiment and safe-haven yen demand.

Net Risk-off Environment Scenario: GBP/NZD

After last week’s stellar GBP/NZD rally on downbeat New Zealand quarterly jobs data and overall risk aversion, the pair appears to be bracing for a retracement to the short-term ascending trend line on the hourly time frame.

Upbeat U.K. jobs figures could allow near-term Fibonacci retracement levels to hold as support, particularly the 50% Fib that coincides with the pivot point (2.3260) or the 61.8% level closer to the trend line and 2.3200 major psychological mark.

Keep your eyes peeled for reversal candlesticks suggesting a potential bounce around these levels if risk aversion continues to weigh on commodity currencies, particularly the Kiwi which could be on the back foot as RBNZ rate cut expectations are running high.

Should any of the Fib levels hold as a floor, look out for a potential continuation of the climb to the swing high or to fresh upside targets closer to the 2.3500 major psychological resistance then R1 (2.3590).

Disclaimer:
The forex analysis content provided is intended for informational purposes only. The technical and fundamental scenarios discussed are presented to highlight potential market opportunities that may warrant further independent research and due diligence. This content is merely one step within the full trading process, and does not constitute investment or trading advice, nor does it represent a suggestion of any specific directional bias. The setups and analyses presented may not be suitable for all portfolios or trading styles.

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