I’m seeing this neat reversal pattern on Guppy’s short-term chart, but will there be enough catalysts in the next session to spur a breakout?
Or are resistance levels more likely to hold for now?
Before we get to the setup, let me first show you the top headlines during the Asian session:
Fresh Market Headlines & Economic Data:
- U.S. coronavirus cases up by 47,000 in biggest one-day spike
- Australia’s AIG manufacturing index up from 41.6 to 51.5
- New Zealand building consents up by 35.6% after earlier 9.9% drop
- U.K. BRC shop price index down by 1.6% after previous 2.4% decline
- Japanese Tankan manufacturing index at -34 versus -31 forecast
- Japanese Tankan non-manufacturing index down from 8 to -17
- Japan’s final manufacturing PMI up from 37.8 to 40.1
- Australia’s building approvals sank by 16.4% in May
- Chinese Caixin manufacturing PMI improved from 50.7 to 51.2 in June
- Japanese consumer confidence improved from 24.0 to 28.4
- China passed sweeping Hong Kong security law
- Asian shares close higher on data rebound
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. Nationwide HPI at 6:55 am GMT
- German retail sales at 7:00 am GMT
- Australia’s commodity prices y/y at 7:30 am GMT
- Swiss manufacturing PMI at 8:30 am GMT
- Final manufacturing PMI readings from euro zone economies starting 8:45 am GMT
What to Watch: GBP/JPY
Traders were hungry for more risk during the Asian session as economic reports were mostly better than expected.Can this positive sentiment stay on for the rest of the trading day? There’s not much in the way of top-tier catalysts in the London session, so market participants might keep up their good mood.
If so, GBP/JPY could be able to bust through the neckline resistance of its double bottom pattern, likely leading to a rally that’s at least the same size as the formation.Just be careful when going long, though, since Stochastic is already indicating overbought conditions or exhaustion among buyers. In that case, resistance could still hold and push the pair back to the lows around 132.00.
Then again, the gap between the moving averages has narrowed enough to hint at a looming bullish crossover. Keep in mind that data from Japan has turned out mostly weaker than expected, so there could be additional yen weakness from fundamentals.
Whichever direction you’re playing, don’t forget to check the average GBP/JPY volatility in setting entries and exits!