Bottom line: GBPJPY counter trend rally could be entering its next phase after potential low carved around 130.00 levels. It may drop further towards 129.30 levels before bulls are back in control though. Medium term outlook remains bullish against 124.00 levels, going forward.
Fundamental Outlook:
USDCHF has been able to hold its ground close to 0.9755/0.9800 levels as the US Dollar gained across major curries in the past few sessions. Major factors include Fed ruling out the possibility of a negative interest rate monetary policy, US Indices loosing over 3% in the last few trading sessions and re-emergence of a possible US-China trade war situation.
Furthermore, the number of US citizens filing for benefits has now risen to over 36 million over the past weeks. The rising unemployment calls for more stimulus and time to support and recover the US economy. Also, the rise in COVID-19 infections with US and European countries reopening, would boost the safe haven US Dollar.
Watch out for the German and Euro Area GDP figures to be out today with negative forecasts at -2% and -3/3% respectively. Also a negative print for the US Retail Sales figures (-12% Vs -8.4%) may add some pressure on the US Dollar today.
Technical Analysis:
GBPJPY has managed to find interim support just above the 130.00 mark. We have been calling for a corrective drop since 135.00 levels and bears might have just found support around 130.00 yesterday. Having said that, probability remains for yet another low towards 129.30 levels before the rally could resume.
GBPJPY structure favors a counter trend rally towards 138.00/139.00 levels, since the currency pair had dropped to 124.00 lows in March 2020. As we write this article, GBPJPY has managed to produce a Waves A and B, within the counter trend. Also note that fibonacci 0.382 retracement at 130.60 could provide necessary support for the next leg to resume higher.
Most traders might have initiated long positions around 130.50 mark, with protective stop loss around 124.00 and projected targets towards 138.00/139.00 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
GBPJPY Chart
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