GBPJPY Gains Continue but They Could Be Temporary

Summary:

The GBPJPY was higher for a fifth consecutive day as the pound continued to bounce from a recent sell-off in the pair.

The GBPJPY was higher for a fifth consecutive day as the pound continued to bounce from a recent sell-off. The pair is now testing resistance and the path ahead will determine whether it’s a correction of the recent drop, or whether sterling can test the recent highs again.

The yen lost some ground with yesterday’s advance in stocks as traders lost interest in safe haven plays and the pound found support after comments by the Deputy Governor of the BoE who played down the need for negative rates. Dave Ramsden said the bank’s lower bound for rates was likely 0.1%, despite the Monetary Policy committee saying in recent meeting minutes that the bank had discussed the policy with a view to implementing them by year-end.

Tomorrow sees the release of industrial production and retail sales figures for Japan. Traders will be looking for an improvement on last month’s industrial number of -15.5%. On retail sales, analysts expect a -3.5% number compared to -2.8% last month. An improvement on these numbers should spur some Yen buying.

Later in the day will see finalized second quarter GDP on the pound, which is likely priced-in, followed by a speech from the Bank of England’s Andrew Haldane. Further clarification could regarding interest rates and the monetary policy path for the U.K. economy. Brexit talks today will focus on fishing rights, which has been one of the more contentious issues in the process. A breakdown of these talks could raise risks over an agreement and lead to pound losses.

GBPJPY Technical Outlook

GBPJPY was higher for a fifth consecutive day and was testing resistance at 136.00. This failed yesterday and a lower close today could lead to a pullback. The price action could be a correction from the recent drop and the 50-day moving average at 138.00 and the uptrend line at 140.00 are stronger levels ahead. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.