Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on NZD/USD as risk sentiment will likely remain the main driver in FX, so be sure to check that out to see if there is still a potential play!
|Equity Markets||Bond Yields||Commodities & Crypto|
DAX: 12640.73 -0.02%
FTSE: 5840.71 -0.99%
S&P 500: 3245.97 +0.28%
DJIA: 26790.49 +0.10%
US 10-YR: 0.668% -0.008
Bund 10-YR: -0.513% -0.011
UK 10-YR: 0.21% -0.01
JPN 10-YR: +0.21% -0.01
Oil: 40.07 +0.35%
Gold: 1864.50 -0.20%
Bitcoin: 10402.46 +1.86%
Ethereum: 338.02 +5.90%
Fresh Market Headlines & Economic Data:
Upcoming Potential Catalysts on the Economic Calendar
Fed Evans speech at 5:00 pm GMT
Fed Williams speech at 6:00 pm GMT
U.K. Consumer confidence at 11:01 pm GMT
Japan Services PPI at 11:50 pm GMT
What to Watch: GBP/JPY
Today, we’re checking out this simple technical setup on GBP/JPY, which lines up with the bigger fundamental themes of risk aversion (rising coronavirus cases/potential lockdowns) and issues within the U.K. (rising no-deal Brexit fears, new lockdown measures).
On the one hour chart above, we can see the pair is in a stair-step move lower, currently consolidating between 133.00 – 134.500, after breaking below the previous consolidation area between 135.50 – 136.50.
The market is now retesting the top of the current range around 134.50, and with Stochastic signaling short-term overbought conditions, technical traders could start taking nibbler shorts in this area.
Fundamental traders could be taking shots as well on the pullback as we don’t have any scheduled major events ahead for the rest of the session to potentially shift the overall bias on the currency pair.
So, the odds are in favor of the bears at the moment, but for the bulls we could see a potential setup if broad risk sentiment shifts positive (e.g., positive COVID-19 vaccine/treatment news, fresh stimulus news, etc.) and or progress is made towards credible Brexit deal.
If this is the case, short-term JPY selling could come back, and if we see a sustained break in GBP/JPY above the 134.50 minor psychological area, then it’s time to consider a long position.
With a strong enough catalyst and a daily ATR of around 135 pips, a move up to the middle of the previous consolidation area (around 136.00) is not out of the question within a session or two.