• GBP/JPY is juggling around 166.00 amid a restrictive upside on hopes that UK inflation will start declining sooner.
• Higher rates from the BoE are forcing firms to postpone their expansion plans.
• BoJ Ueda is advocating the continuation of an already decade-long ultra-loose monetary policy to sustain wage growth.

The GBP/JPY pair is inside the woods around 166.00 in the Asian session. The cross has been directionless from the past two trading sessions as investors are anticipating quick deceleration in the United Kingdom (UK) inflation amid easing labor market conditions. Higher rates from the Bank of England (BoE) are forcing firms to postpone their expansion plans, which are making a dent in labor demand.  

BoE Chief Economist Huw Pill looked confident on Thursday that UK Consumer Price Index (CPI) will start falling from the second quarter due to large rises in energy prices from last year dropping out of the annual comparison, as reported by Reuters.

Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda is following the footprints of ex-BoJ Governor Haruhiko Kuroda as the former is advocating the continuation of already decade-long ultra-loose monetary policy to sustain wage growth and pushing inflation rate steadily above desired levels.

Exhaustion in the upside momentum after reclaiming prior resistance plotted from April 04 high at 166.40 has triggered fears of reversal. The cross is oscillating in the range of 165.40-166.85, indicating an inventory distribution phase from institutional investors to retail participants.

The 20-period Exponential Moving Average (EMA) at 166.13 is overlapping the asset price, conveying a rangebound movement.

Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, signaling that investors are awaiting a critical trigger for further action.

Should the cross breaks below April 12 low at 165.38 decisively, the Japanese Yen bulls will drag the asset toward April 10 low at 164.00 followed by April 05 low at 162.78.

On the flip side, an upside move above April 13 high at 166.85 will drive the asset toward December 16 high at 168.00 and December 15 high at 168.78.

GBP/JPY hourly chart