The Brexit divorce is now official and while there is posturing on both sides of the camp on the result of this camp, the GBP is recovering. After posting successive losses on the past two days, the GBP is now strengthening and is particularly robust against the Yen. This trend should continue but at the moment though, we cannot really judge what is to happen two years down the line after the negotiations. If it turns out to be harmonious and ample time is availed for complete negotiations, the GBP should rebound and gain. It really should. Just recently a UK official sighting short negotiation period spelled out by the Treaty of Lisbon and that the UK decision to leave the EU won’t result in the best deal for the UK. The monetary stance taken by the BoJ on the other hand is not supportive for the JPY. Anyway, a stronger JPY will result in reduction in Japanese export profits and the further make them expensive. Easing should also spur inflation which is only a wish for the BoJ and PM Abe.
Looking at the charts, there is a clear bullish engulfing double bar reversal pattern in the daily chart that should mean the beginning of the GBP rally at least in this pair. After periods of narrow ranging in the lower timeframes, the GBP is building up its momentum. The stochastics are reversing from the oversold zones and more longs are entering-if you check out the OBV.
My strategy for this pair is simple. Look to enter long tomorrow in the 30 min charts as follows:
Buy Limit: 138.50
Stop Loss: 138.00
Take Profit: Wait till a sell signal formed. This is a swing trade held for a couple of weeks.
Have a good trading day.