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GBP JPY Long Term Bearish Engulfing


Aug.14.2017

GBP JPY Long Term Bearish Engulfing: Well, well, well! It's been a looooong time since I last published on our blog! While I've been keeping in touch with our investing group members, between the moving, summer traveling and another secret development (I'll reveal the secret in about a month) I haven't had a chance to share my nuggets of wisdom here. But guess what? We are back! And first and foremost, we're gonna take a look at an apparent GBP JPY long term bearish engulfing development which could be impacted by this week's top tier data out of the UK. Let's take a look at this naughty pair from fundamental, technical, and market sentiment points of view to round up the Invest Diva Diamond Analysis; IDDA

 

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1- Technical Points: GBP JPY Long Term Bearish Engulfing

Daily Time Frame:  The GBP/JPY pair has recently confirmed two out of three of our  Ichimoku Secrets triggers on the daily chart. Last week it confirmed below the Ichimoku cloud, and currently, it appears to be in the pullback mode.  Furthermore, the pair appears to be completing a long-term double-top chart pattern, with the neckline at 138.95.

GBP JPY Long Term Bearish Engulfing - Daily Chart GBP JPY Long Term Bearish Engulfing - Daily Chart

 

Fun Fact: Ichimoku strategy works best for Japanese Yen crosses. Because it is mostly used by Japanese traders. However, as Ichimoku users grow in number, we could expect more accuracy across other securities as well.

 

Monthly Timeframe: On the monthly chart, the GBP/JPY pair has formed a decisive bearish engulfing so far during the month of August, after July's spinning top. The pair remains below the monthly Ichimoku cloud, with the future cloud downward moving in red.

 

GBP JPY Long Term Bearish Engulfing - Monthly Chart GBP JPY Long Term Bearish Engulfing - Monthly Chart

2- Fundamental Points

The second point of the IDDA suggests looking at the economic and political developments that could impact the currency pair.

 

Japan Side: Last week during the North Korean tensions, the trading crowd turned to the Japanese Yen and the Swiss Franc as a safe haven. However, with the USD making a comeback this week, the market has been selling off their JPY. We need to keep in mind that North Korea remains a threat to both the US and the Japanese Yen. However, since Kim Jong Un has been throwing its threats at the US territory of Guam this time, the USD may be poised for more volatility should anything crazy happen, comparing to the JPY.

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UK Side: We’ve got an eventful week coming up as the U.K. gears up to print three top-tier reports.

- U.K. CPI (Aug 15, 9:30 am GMT).

- U.K. Jobs Data (Aug 16, 9:30 am GMT).

- U.K. Retail Sales (Aug 17, 9:30 am GMT).

A rebound in inflation (CPI) is expected for July, with analysts projecting that the headline figure could come in at 2.7% and the core figure could tick up to 2.5%.

The unemployment rate is projected to hold steady at 4.5%.

As for the retails sales, it’s tough to predict how the actual reading might come out. It’s worth noting that the dip in price levels in the past 6 months might have encouraged consumers to take advantage of bargains.

 

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With that, we are expecting a ton of volatility in the GBP crosses, and therefore planning ahead for a long-term investment, instead of a short-term trade which could be very risky.

3- Market Sentiment

Market sentiment analysis is the 3rd point of the IDDA, taking a contrarian view to crowd sentiment. Retail trader data shows 45.3% of traders are net-long GBP JPY as of Monday. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPJPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPJPY-bullish contrarian trading bias. 

This current market sentiment goes against our long-term bearish technical outlook.

 

So, When is a Good Time to Take Advantage of GBP JPY Long Term Bearish Engulfing?

Disclaimer (1): As 4th point of the IDDA, you must calculate your risk tolerance before deciding on which trading strategy is suitable for your portfolio. We normally do not recommend trading without three or more confirmations of a specific direction from technical, fundamental and market sentiment points of view.

Disclaimer(2): Forex is one of the HIGHEST risk investing instruments there is. If you don't have sufficient risk tolerance to trade forex, you can try investing other online securities.

Final thoughts: Based on our IDDA outlook, the could first see some up moves in the coming days during the UK data dump. Then, based on the long-term technical analysis, we could see a drop towards our key support levels.

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Combining all points of the IDDA, here are Invest Diva's calculations for important approximate levels to keep an eye on:

 

Support Levels Turning Point Resistance Levels
136.43 141.75 145.04
138.95 143.19 147.86

 

 

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