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We’ve pretty much got an empty calendar ahead, so today’s market news could continue to be the drivers of volatility for the latest short-term setups, including this break-and-retest pattern on GBP/JPY.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on USD/CAD after a Fed induced spike in USD volatility, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 13182.30 -0.55%
FTSE: 6046.41 -0.53%
S&P 500: 3366.83 -0.55%
DJIA: 27969.05 -0.23%
US 10-YR: 0.666% -0.021
Bund 10-YR: -0.494% -0.015
UK 10-YR: 0.184% -0.029
JPN 10-YR: 0.008% -0.008
Oil: 40.83 +1.67%
Gold: 1948.40 -1.12%
Bitcoin: 10866.84 -0.77%
Ethereum: 382.16 +4.40%

Fresh Market Headlines & Economic Data:

Bank of England warns of ‘unusually uncertain’ outlook, reveals negative rates under consideration

Another 860,000 Americans filed for unemployment benefits last week

U.S. housing starts fall more than expected in August as multi-family home construction slumps

Philly Fed index fell 2 points to 15.0 in September

ADP Canada National Employment Report for August: -205K m/m

Dow drops 350 points, reopening trades and tech shares lead the declines

Oil falls as crews return to U.S. Gulf rigs, economic recovery stalls

EU’s Barnier still hopes trade deal with Britain possible, sources say

Annual inflation down to -0.2% in the euro area; Down to 0.4% in the EU

Upcoming Potential Catalysts on the Economic Calendar

Japan Inflation Rate at 11:30 pm GMT

What to Watch: GBP/JPY

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

As we can see above in the “Upcoming Potential Catalysts” section, we’ve got almost nada to spark fresh volatility into the forex markets.

The Japanese inflation update is a low tier event, but it may be enough to get some movement for the yen, and with the BOE meeting sparking some volatility for Sterling at the moment, GBP/JPY looks to be one of our best shots for short term moves at the moment.

On the one hour chart above of GBP/JPY, we can see the pair has been in consolidation mode over the past week, trading in a tight range between 135.50 – 136.50, less than its daily Average True Range of around 135 pips.

Then we saw a downside break on today’s session, likely a reaction to the Bank of England’s latest monetary policy statement, in which they announced that they were looking further into negative interest rates.

Well, the drop seems to be short-lived as Sterling has recovered to pre-event levels, bringing on the question of whether or not sellers will jump in to play the longer-term selling bias on Sterling?

Well, the scenario to look out for if you’re bear on the pair is bearish reversal patterns now that the consolidation area is retested, and possibly some help from the Japanese inflation update if it comes in better than the expected read of -0.4% y/y; if it comes in positive, that will likely spark a rally in the yen short-term.

For the bulls on the pair, a long position is a tough argument now with the possibility of negative rates rising in the U.K., Brexit drama, and as the COVID-19 story worsened today in the U.K. (Britain’s COVID-19 testing regime buckles with delays and capacity constraint).

But if we see a fresh catalysts that pushes GBP/JPY above the consolidation area, watch out for a break-and-retest setup around the 136.50 handle, before considering a long swing position, of short-term one depending on the catalyst.