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With broad risk sentiment leaning negative and the BOE hitting the markets with an extended QE program, it looks like the downside break in GBP/JPY could have some legs for the next session or two.

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Fresh Market Headlines & Economic Data:

U.S. Jobless claims total 1.5 million, worse than expected as economic pain persists

Bank of England extends QE by £100 billion

ADP Canada National Employment Report shows an increase of 208K jobs from April to May

New Canadian house prices edged up 0.1% at the national level in May following no change in April.

Canadian wholesale sales volumes dropped 21.5%, a record monthly decline, to their lowest level since September 2009

EU Signals Compromise on Fish, Courts in Brexit Deal

Italian trade balance dropped sharply in April 2020 to -1.1B Euros

Swiss National Bank signals need to maintain negative rates

SNB Signals Stronger Currency Intervention, If Needed

Swiss trade balance closed May with a surplus of CHF 2.8B

Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:

Fed Mester speech at 4:15 pm GMT
BOC Schembri speech at 5:30 pm GMT
UK Consumer Confidence at 11:01 pm GMT
Japan Inflation rate at 11:30 pm GMT
Bank of Japan Monetary Policy Meeting minutes at 11:50 pm GMT
Australia Retail Sales at 1:30 am GMT

What to Watch: GBP/JPY

GBP/JPY 1-Hour Forex Chart
GBP/JPY 1-Hour Forex Chart

Taking a look at GBP/JPY once again, this time with a different take from our London watchlist post now that the Bank of England has released their latest monetary policy statement. After announcing their plans to increase their bond purchasing, Sterling seems to be on a one way trip lower against the majors.

And with broad risk sentiment on the downswing towards negative thanks to weak economic updates, the support break in GBP/JPY makes the top of our watchlist, especially with Japanese inflation updates and BOJ meeting minutes ahead in the Asia session.

For the bears on GBP/JPY, the momentum is currently in your favor, and the classic descending triangle break shown above is likely to attract technical swing traders into taking some short bets. Looking at entering short positions from current levels up to the break area (around 133.50) makes sense for a swing trade, but for a short-term idea, it may make sense to wait for a pullback higher after a strong move lower (GBP/JPY down 170 pips from session open, over daily ATR of around 167 pips).

For the bulls on GBP/JPY, an argument could be made for a short term bounce around current levels given the full daily ATR move from the open. But that’s a bias that should be held very quickly given the catalyst from the BOE today.

If the inflation data from Japan / BOJ minutes severely disappoint, then a long swing argument could be made, but that’s not a position many traders would take without a shift in global risk sentiment back towards positive.