Daily U.S. Session Watchlist: GBP/JPY

We’ve got data ahead from both the U.K and Japan that may break GBP/JPY out of its consolidation behavior.

Will we see momentum pick up or will the support and resistance levels hold? 

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

Dow and S&P 500 fall as weekly jobless claims jump

U.S. weekly jobless claims jump back above 1 million

Philadelphia Fed manufacturing index slows for second straight month in August

Kudlow says U.S. remains engaged with China over trade

Employment in Canada increased by 1,149,800 jobs from June to July according to the July ADP Canada National Employment Report.

ECB Signals September to Be Key Month to Read the Economy

German Producer prices in July 2020: -1.7% on July 2019

Swiss Trade recovered in July 2020: seasonally adjusted exports rose by 1.1 percent to CHF 17.7B; imports rose by 2.5 percent to CHF 15.1B.

Upcoming Potential Catalysts on the Economic Calendar

Bank of Canada Beaudry speech at 4:00 pm GMT
Fed Daly speech at 5:00 pm GMT
Australia Manufacturing & Services PMI at 11:00 pm GMT
U.K. Consumer confidence at 11:01 pm GMT
Japan Inflation rate at 11:30 pm GMT
Japan Manufacturing & Services PMI at 12:30 am GMT (Aug. 21)
U.K. Retail sales at 6:00 am GMT (Aug. 21)
Euro area Manufacturing & Services PMI at 8:00 am GMT (Aug. 21)
U.K. Manufacturing & Services PMI at 8:30 am GMT (Aug. 21)
Canada New housing price index, Retail sales at 12:30 pm GMT (Aug. 21)

What to Watch: GBP/JPY

On the one-hour chart above of GBP/JPY, we can see that the pair has been in consolidation mode since the beginning of August, trading roughly between 138.00 and 140.00.

Recently, though, the bulls have been holding the line at around the 139.00 handle, so we may be at the early stages of an ascending triangle formation.

Will it continue to form? Well, we’ve got potential economic catalysts from both the U.K. and Japan as seen in the “Upcoming Potential Catalysts” section above, most notable is likely U.K. retail sales data as the most probably for sparking a significant rise in volatility.

Expectations are for the July’s read to take a step back from the big bounce in June, which could potentially put short-term pressure on Sterling.

With that potential scenario in mind and if broad risk sentiment continues to lean negative, Guppy bears may have the edge here for the next session.

With the currency pair currently testing and holding at the rising trendline marked above, a potential entry strategy for the bears could be to scale into a short starting from current levels up to the major psychological handle of 140.00.

Or for the more conservative approach could be to wait for the upcoming data from both countries and short on a break of the rising ‘lows’ pattern if the fundies argue for it.

For the bulls who expect better-than-expected U.K. data and/or weaker-than-expected Japanese PMI data, scaling in long at current levels down to the 138.50 handle makes sense, but be ready to adjust/cut out of the trade if the data doesn’t go your way.

For the ultra-conservative traders out there looking for a swing position, wait for a retest of the bottom of the consolidation range (around 138.00) before considering a long position, a reachable move within a session given the daily ATR of around 100 pips.