The economic calendar is relatively quiet ahead, but there could be catalysts for the British pound and Japanese yen to play the recent move lower in Guppy.
|Equity Markets||Bond Yields||Commodities & Crypto|
|DAX: 12291.14 +0.25%
FTSE: 7513.36 +0.06%
S&P 500: 2982.21 +0.19%
DJIA: 27147.30 -0.03%
|US 10-yr 2.038% -0.012
Bund 10-YR -0.34% -0.018
UK 10-YR: 0.728% -0.007
JPN 10-YR: -0.135% -0.012
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Gold: 1415.60 +0.22%
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Fresh Market Headlines & Economic data:
- US debt ceiling and budget deal ‘near final’; suspends ceiling for 2 years
- Canadian wholesale trade falls 1.8% in May on lower auto sales
- Oil prices surge 2% as Iran tensions rise
- China-US trade talks could resume soon, but Washington’s tariffs have to go, state media say
- EU prepares multi-billion aid plan to shield Ireland from no-deal Brexit
- Two Top U.K. Officials Vow to Quit If Boris Johnson Becomes Next PM
- Brexit May Have Already Triggered U.K. Recession, Niesr Says
- Japan’s Abe Falls Short of Supermajority in Election Win
Upcoming Potential Catalysts on the Forex Calendar:
- BOJ Kuroda speaks in Washington, D.C. at 4:00 pm GMT
- RBA Kent speaks in Sydney at 11:30 pm GMT
- Japan core CPI at 6:00 am GMT (July 23)
- Conservative Party votes on new leader/new British PM (tentative)
- Euro Area consumer confidence at 3:00 pm GMT (July 23)
- U.S. Existing Home Sales at 3:00 pm GMT (July 23)
What to Watch: GBP/JPY
As mentioned above, the economic calendar is looking pretty slim in terms of economic updates, but we do have a geopolitical update that could spark moves for the British pound–the announcement of the next British Prime Minister. The vote for the next Conservative Party leader / next PM is going on today, with Boris Johnson the likely replacement for the current PM, Theresa May. We’ve also got a speech from Bank of Japan Governor Haruhiko Kuroda speaking at the International Monetary Fund later today, and while it’s highly unlikely we’ll get market moving news, we still have to pay attention in case there are any new insights on Japan’s monetary policy outlook.
So, with those events in mind, we’re watching GBP/JPY for today’s session on the possibility of volatility picking up within the next day or two. And looking at the one hour chart above, we can see that the market is currently in a downtrending pattern with the area between 135.00 – 135.25 recently acting as a strong area of interest.
Traders should on the look out for a retest of this area to play the price downtrend and the recent strong bearish sentiment on the British pound as Boris Johnson has kept up rhetoric that the U.K. will leave the EU on October 31, with our without a deal (i.e., a potential disastrous scenario). A retest there could draw in sellers again, and the potential short play R:R looks pretty favorable as a loss could be cut as soon as the falling ‘highs’ is invalidated, while the potential target around the previous swing lows (134.00) is reachable within a session or two as it sits within the daily range (roughly 80 – 90 pips).
For the bulls, you might need the other candidate Jeremy Hunt to win the PM seat in order to get a bullish enough move to break the falling ‘highs’ on Guppy and keep the momentum higher. And/or a very dovish statement from BOJ Governor Kuroda this afternoon, but both are highly unlikely scenarios at this point.