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GBPJPY Confirms Above Ichimoku – British Pound Overview


Nov.15.2016

GBPJPY Confirms Above Ichimoku - British Pound Overview

After a long year and a half dancing under the shadow of a falling cloud, finally GBPJPY confirms above Ichimoku cloud. Successfully. And by that I mean we have strong technical verifications of this on at least two different time frames. However, with all the uncertainty and major economic events out of the UK this week, do the other points of the IDDA agree? It's time to find out.

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Technical Analysis | GBPJPY Confirms Above Ichimoku

Daily Chart: It's been a hard year for Mr. British Pound. And Brexit added to his pressure. As Japanese Yen got stronger acting as a safe haven on global uncertainty, GBP did the opposite. The GBP/JPY officially broke below the Ichimoku cloud on the daily chart in December 2015 and since then saw nothing but down... until it hit the support of 125. 

GBPJPY Confirms Above Ichimoku - Daily Chart Technical Analysis GBPJPY Confirms Above Ichimoku - Daily Chart Technical Analysis

While this pair doesn't include the US dollar, the US election results did have an indirect impact on it. The Japanese Yen got weaker across the board, and that is when we saw the first big push towards the Ichimoku cloud on November 9th. The pair broke above the pivot of 129.50. The next day it broke above the upper band of a symmetrical triangle. The after that it broke above the Ichimoku cloud. And on Monday November 14th, it officially confirmed the break. 

 

 

However, even though we have a number of concrete bullish signals just on the daily chart, the only downside to this is that there is a very good chance that this is a FALSE BREAK. GBP/JPY has done it before. There is no reason it won't do it this time.

That is why we need the pair to break above the long-term 23% Fibonacci retracement level at 140.15 before we conclude a long term reversal.

 

Monthly Chart: Here is where things get interesting. On the monthly chart, we have yet another huuuuge bullish signal as the pair formed a bullish engulfing candlestick pattern. Even though the pair still hasn't completed the cycle back to the lows of 2012, this could be a sign that the pair might have decided to end the cycle a bit early (which is completely understandable in the forex world) and reverse the direction. Especially considering the fact that this very thing happened in 2009, at the same EXACT level.

GBPJPY Confirms Above Ichimoku - Monthly Chart Technical Analysis GBPJPY Confirms Above Ichimoku - Monthly Chart Technical Analysis

 

Fundamentals | GBPJPY Confirms Above Ichimoku

What went down: The fundamentals aren't as positive for Mr. Pound as the technicals. It is quite mixed so far actually.

First and foremost, UK CPI missed expectations on Tuesday. However Bank of England (BOE) governor Carney said that the central bank now has a neutral stance on monetary policyt, and that it is not actively considering expanding its QE program. This is good news for Mr. British Pound.

On the other hand, and as the world seems to be get cues from leaked material, we have leaked memos regarding Brexit that may also impact Mr. British Pound. According to a November 7 memo obtained and then leaked by The Times and republished by Reuters, Theresa May’s government is divided on Brexit. And because of the said division, “no common strategy has emerged” in how to approach Brexit negociations.

If the rumors are true and we have at least 6 months for Brexit to finalize or maybe even two years. With that the GBP crosses could take a break from the pressure and move up a bit.

However a spokesman for Theresa May has said that the leaked memo, “has no authority.” I guess only time could tell on this one, eh?

 

 

What's up next: During the London session on Wednesday the UK Jobless Claims Change (OCT) will be out at 9:30 AM GMT. The claimant count change, which measures the difference in the number of people claiming unemployment benefits from one month to the next, is expected to show a 1.9K rise in joblessness for October. The unemployment rate is expected to hold steady at 4.9%. 

 

 

On Thursday  UK Retail Sales (MoM) (OCT) will be out at 9:30 AM GMT. It is expected to show a 0.5% increase in consumer spending. A stronger than expected reading could be enough to assure Invest Divas that the Brits are keeping calm and carrying on with their purchases, which could be enough to to give us a fundamental thumbs up on our bullish scenario for GBP/JPY.

Market Sentiment | GBPJPY Confirms Above Ichimoku

According to one of the largest forex brokers in the US, 46% of traders were bullish on GBP/JPY on Tuesday.  Long positions are 2.5% lower than Monday and 22.3% below levels seen last week. We use this as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBPJPY may continue higher. The trading crowd has grown further net-short from yesterday but unchanged since last week. The combination of current sentiment and recent changes gives a further bullish trading bias.

Trading Strategy | GBPJPY Confirms Above Ichimoku

Putting the technical, fundamental and sentimental points of the IDDA approach together, the medium-term bullish strategy seems to have a reasonable risk-reward ratio.

Bullish Scenario:

Depending on your risk tolerance, you could consider targeting 140.15 as this week's UK fundamental volatility unfolds.

A break above this level could open doors for further gains towards 38% Fibonacci level at 149.

Bearish Scenario:

A break back below the Ichimoku cloud would change our outlook back to bearish with 125 as first alternative target.

Stay tuned for market updates and signals on our premium closed Facebook page. As always, when in doubt, book a private session with me to get your portfolio on track.

 

Here are Invest Diva's calculations for important GBP/JPY approximate levels to keep an eye on:

Support Levels Turning Point Resistance Levels
125 129.50 140.15
120 135 149

 

 xoxo

Kiana 喜愛成
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