Before we look at the trade setup, check out the major headlines that affected the major currencies during the Asian session:
Fresh Market Headlines & Economic Data:
- FOMC kept interest rates on hold at <0.25% as expected
- Fed head Powell: U.S. faces long road to recovery
- U.S. central bank projects GDP to shrink by 6.5% this year and joblessness to reach 9.3%
- U.K. RICS house price balance down 32% vs. projected 24% drop
- Japan’s BSI manufacturing index slipped from -17.2 to -52.3 vs. -20.5 consensus
- Australia’s MI inflation expectations dipped from 3.3% to 3.2%
- Asian shares hit pause on rally as risk-off flows return on downbeat Fed
Upcoming Potential Catalysts on the Economic Calendar:
- French private payrolls q/q at 6:30 am GMT
- Eurogroup meetings to start today
What to Watch: GBP/JPY
Guppy looks ready to turn from its uptrend as price formed a head and shoulders reversal pattern and broke below the neckline support.This suggests that the pair could be in for a slide that’s at least the same height as the chart formation, which spans around 300 pips.
Meanwhile, the U.K. just printed a downbeat mid-tier report and isn’t due to release any new data in the next few hours. This could keep sterling under pressure, especially with Brexit concerns still in the background.
The 100 SMA looks ready to make a bearish crossover to confirm that selling momentum is about to pick up. However, Stochastic is reflecting oversold conditions so a quick retest of the broken neckline near 136.50 could be possible.