GBPJPY has been trending lower on the longer-term time frames but it looks like a retracement is in order. Price bounced off the 151.50 minor psychological support and might be due for a pullback to the descending trend line connecting the latest highs of price action.

This coincides with the area of interest around the 158.00-159.00 levels, which also line up with the dynamic resistance around the moving averages. The 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside and that the selloff could resume soon.

A shallow pullback could last until the 38.2% Fib or the 155.00-155.50 area and reversal candlesticks forming at this level could be an indication that the downtrend is resuming. Stochastic is still on the move up so buyers are still in control, but it is also nearing the overbought area so buying pressure could fade soon.

Event risks for this setup include the UK CPI release today and the BOE statement on Thursday. Headline inflation is expected to hold steady at 0.3% while core inflation could rise from 1.2% to 1.3%. Underlying inflation indicators such as the PPI, RPI, and HPI are also expected to show gains.

Meanwhile, the BOE is expected to keep interest rates on hold while maintaining their pace of asset purchases. Still, dovish remarks from policymakers could keep a lid on the pound’s gains while upbeat comments could allow it to rally.

GBPJPY5

As for the yen, the recent jawboning attempts from Japanese officials seem to have fallen on deaf ears as the currency has still advanced against its rivals and might continue to do so until actual action is seen.

2 thoughts on “GBPJPY Major Retracement (Apr 12, 2016)”

  1. Ryan Gandalf van Jaarsveld says:

    Thanks Kate! My thoughts:

    1. GBPJPY: Double bottom on H4 with a rising stochastic – daily showing over sold though no indication of turning up – will stay oversold in a trending market. We find resistance at WPP which coincides with role reversal and two other pivot points – seems to be strong resistance. At the time of writing this price has respected this resistance. Note that price did break the 21 EMA on H4.
    2. GBPUSD: COT Report shows there are still a lot of bears in the market so we should expect a sell off soon – stochastic at overbought and beginning to breach the 80 line. Price hit 61.8 Fib on H4 which saw some profit taking from bulls – this forms a double top with this resistance being respected yesterday as the high for the day.
    3. EURGBP: See Nuno’s analysis in support of a possibly weaker pound or stronger Euro… The trend lately, IMO, is a weaker pound – it is not being allowed to rise due to brexit bears
    4. Fundamental data: Negative result see’s us at the perfect place for a sell off and hopefully we can ride a full H4 stochastic cycle. If it is good news then I’ll look for the next resistance if we break current levels for a counter trend trade

  2. Daniel Chan - Forex.Today says:

    Thanks Excellent view point.

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