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Reversal alert! This pair fell through its head and shoulders neckline and could gain more bearish momentum in the next few hours.

Downbeat mid-tier data from the U.K. and risk-off flows from the earlier session combined forces for a breakdown on the chart pattern.

Before we look at the trade setup, check out the major headlines that affected the major currencies during the Asian session:

Currency Snapshot

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Fresh Market Headlines & Economic Data:

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

GBP/JPY 1-hour Forex Chart
GBP/JPY 1-hour Forex Chart

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.

Risk aversion appears to have returned to the markets as the Fed shared a grim economic outlook, prompting a surge in safe-havens like the Japanese yen.

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.

Whether you’re eager to hop in at market or hoping to catch a pullback, don’t forget to take the average GBP/JPY volatility into consideration when setting exit levels!