With global markets in risk aversion mode and top tier economic data coming up for the U.K., GBP/JPY looks like it’s ready to move again.
|Equity Markets||Bond Yields||Commodities & Crypto|
|DAX: 11855.38 -1.70%
FTSE: 7152.30 -0.71%
S&P 500: 2817.72 -2.21%
DJIA: 25399.31 -2.09%
|US 10-yr 2.405% -0.05
Bund 10-YR -0.066% -0.019
UK 10-YR: 1.105% -0.031
JPN 10-YR: -0.047% +0.004
|Oil: 62.99 +2.16%
Gold: 1296.80 +0.73%
Bitcoin: 7404.96 +7.04%
Etherium: 193.85 +3.83%
Fresh Market Headlines & Economic data:
- China to impose tariffs on U.S. goods despite Trump warning
- Bitcoin holds above $7,000 after hitting nine-month high
- Oil prices up as Middle East tanker attacks heighten supply concerns
- May Aims to Reopen EU Brexit Talks to Win Corbyn’s Support
- Australian home loan lending resumes its slide
- Japanese indicator points to recession amid fresh Abenomics risks
Upcoming Potential Catalysts on the Forex Calendar:
- Japan bank lending & current account at 12:50 am GMT (May 14)
- Australia NAB business confidence at 2:30 am GMT (May 14)
- German CPI & WPI at 7:00 am GMT (May 14)
- ECB Villeroy speech in Paris at 8:00 am GMT (May 14)
- U.K. unemployment & earnings at 9:30 am GMT (May 14)
- European ZEW economic sentiment at 10:00 am GMT (May 14)
What to Watch: GBP/JPY
Thanks to the increasing intensity in the trade spat between the U.S. and China, global financial markets have solidly started the week in risk aversion mode with equities and bond yield lower, and safe haven currencies out performing the high-yielders on the session. The Japanese yen has found some legs, which could continue into the next session as it’s not likely the geopoitical drivers aren’t likely to change in the next day or two. And we’re pairing that with the British pound since it does have top tier economic updates coming soon in the form of employment data, so volatility should remain favorable for short-term traders in GBP/JPY.
From a price action perspective, the pair has recent seen some pressure after breaking a major support area around 144.00, but recent consolidated over the last couple of sessions between 142.50 – 143.00. That looks to be breaking down on the fresh geopolitical catalysts from the U.S. and China, and doesn’t look to be slowing down.
For the bears, if you’ve done your work to be confident of a weak U.K. jobs update coming up, this could be an opportunity to hop in now on the break for what could be a new leg lower. If you haven’t done the work or not so confident on the U.K. jobs update, a more conservative approach would be to wait for a retest of the consolidation area before considering a short play, or maybe event starting with a tiny nibbler position.
For the bulls, the U.S.-China trade story needs to completely flip or maybe we see something positive on the Brexit front before getting interested in GBP/JPY. If any of those scenarios do occur a break above the 143.00 resistance area should be considered, and with the next resistance target around the 145.00 handle, the potential risk-to-reward is favorable if using the daily ATR of around 100 to 110 pips as a stop.