Breakdown alert! Guppy busted out of its short-term consolidation pattern but might still pull back for a quick retest.
Can grim Brexit expectations keep dragging sterling south?
Before looking at the setup, let’s review the top headlines in the late U.S. and early Asian sessions:
- Brexit talks still dragging over fisheries issue, no deal yet
- Crude oil takes hits on likelihood of more lockdown measures
- Canadian Ivey PMI down from 54.5 in October to 52.7 November vs. 52.3 forecast
- U.S. consumer credit down from $15B to $7.2B vs. $17.6B consensus
- Japanese average cash earnings slipped 0.8% y/y after earlier 1.3% slide
- Japan’s household spending rebounded 1.9% vs. 2.7% forecast
- U.K. BRC retail sales monitor up 7.7% after earlier 5.2% gain
- Australian NAB business confidence index improved from 3 to 12 in Nov
- Japan announced $708B in fresh stimulus for post-COVID growth
- Asian shares stumble as stimulus hopes overshadowed by rising cases
Upcoming Potential Catalysts on the Economic Calendar:
- Swiss unemployment rate at 7:45 am GMT
- Eurozone and German ZEW economic sentiment figures at 11:00 am GMT
What to Watch: GBP/JPY
Guppy broke below the bottom of the rising wedge pattern highlighted by Forex Gump earlier this week.If you’ve missed this breakdown and still would like to short the pair, you could wait for a pullback instead. Price is retreating to the 50% Fib that appears to be keeping gains in check but might be able to go for a larger correction to the 61.8% level.
Keep in mind that Brexit talks are going nowhere so far, and market watchers are getting frustrated as the exit date draws near. This looming uncertainty could force pound bulls to retreat while lifting demand for safe-havens like the yen.
The Japanese currency also seems to have drawn some support from the government’s announcement of a fresh stimulus package aimed at post-COVID growth. To top it off, the focus on the rising number of cases and the possibility of more lockdowns is also keeping risk aversion in play.