Business-Insider

GBPJPY has done nothing but drive itself into an even tighter wedge formation as markets await the next big shift in rate differentials. Will the carry trade prevail or will traders liquidate their leveraged positions en masse? With central bank action on the docket this week, GBPJPY could maintain its lofty levels as price has steadied above support at 241.00.

The Bank of England is widely expected to leave rates steady at 5.50 percent on Thursday morning, however, the British monetary policy makers have been known to surprisingly hike in the past, citing upside inflation risks. Following the Reserve Bank of New Zealand's unexpected rate hike Wednesday evening, traders may be feeling especially edgy ahead of the UK central bank's announcement.

If the BOE defies analyst estimates, the British pound will surge, sending GBPJPY hurdling towards resistance at 243.00. However, should we see steady UK rates, GBPJPY may go little changed or soften slightly, as no statement will be released and markets will have to await the release of the meeting minutes on June 20th. Furthermore, if we see a combination of unchanged rates in the UK along with a sustained bout of Japanese yen strength, GBPJPY could break support, resulting in precipitous declines towards 239.00.

Analisys by DailyFX