Volatility has picked up in the pound over the past couple of sessions, and with a busy economic calendar for Japan ahead, GBP/JPY looks like one of the best pairs to watch for short-term opportunities.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on USD/CHF as a triangle consolidation pattern forms, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
- U.S. initial jobless claims rise 2.12 million in latest week while continuing claims decline
- U.S. Durable-goods orders plunge 17.2% in April vs. forecasts for 18.2% drop
- U.S. Pending home sales plummet in April, but demand is showing signs of a rebound
- Canada’s current account deficit expanded by $1.8B in the first quarter to $11.1B
- German Expected inflation rate for May 2020: +0.6%
- Spanish Flash CPI at -1.0% in May
- German businesses don’t expect quick return to normal: Ifo
- Let’s risk overdoing stimulus for searing COVID hit: BoE’s Saunders
- UK still a long way from agreeing EU trade deal, negotiator says
- BoE’s Saunders on negative rates: we review our toolkit regularly
Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:
- Japan Unemployment Rate, CPI at 11:30 pm GMT
- Japan Retail sales, Industrial production at 11:50 pm GMT
- Australia Private Sector Credit at 1:30 am GMT (May 29)
- Japan Housing starts, Construction orders at 5:00 am GMT (May 29)
What to Watch: GBP/JPY
Brexit controversy (Step up your no-deal Brexit plans, EU tells banks in Britain) and speculation on what the Bank of England will do next has had the British pound moving and shaking this week, pretty normal sentiment actually for Sterling.
And when combined with a potential boost in volatility from the upcoming economic updates from Japan, GBP/JPY is likely one of the better options for quick pips in the coming session or two.
On the hourly chart above of GBP/JPY, we can see price action forming several potential setups that should be on everyone’s watchlist, whether you’re a bull or a bear.
For the bulls, the current short-term trend is to the upside as the “reopening trade” has put pressure on the Japanese yen recently.
But there is a potential resistance area just ahead marked on the chart around the 133.00 handle to watch out for if you’re bullish.
If the currency pair does continue higher on weak Japanese data, then a break above 133.00 is a signal to start building a long position for either a day trade or swing trade, depending on the momentum, the data, and the reaction.
If we see positive Japanese economic updates, a shift in global risk sentiment towards negative, and/or surprise bearish news on the Brexit/U.K. front, then a break below the rising ‘lows’ is the pattern to watch before considering a short position in GBP/JPY.
Also, consider a short position if the resistance area around 133.00 is retested and holds.
With a daily ATR of around 135 pips, the May swing low is an attractive target for a swing trade that is reachable within a few sessions if the moment picks up and stays strong.
Given the recent positive risk sentiment, a shift there would likely get Guppy moving to the downside on some long position profit-taking.