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GBPJPY Resistance Challenged by Upcoming Data


May.15.2017

We've got a ton of data coming up for the British Pound which could challenge the GBPJPY resistance that the pair hit last week after BOE Super Thursday.  The tide could still turn this week with these major catalysts lined up. With that, it is time to conduct an IDDA to help you develop a trading strategy for this naughty forex pair. 

 

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1- Technical Points: GBPJPY Resistance Held

Daily Time Frame: Before Super Thursday, the GBP/JPY pair hit a 6-month resistance at 147.84. The combination of the economic data and market sentiment forced the pair to turn around and move towards the 23% Fibonacci and pivot level of 145. But it didn't quite get there. On Monday the pair formed a bullish engulfing indicating GBPJPY resistance could be challenged on the upcoming data this week.

The pair started Tuesday's Sydney session on a neutral sentiment. However it remains above the daily Ichimoku cloud with all Ichimoku Secrets elements confirmed.

 

Fun Fact: Invest Diva group members made delicious pips on GBP/JPY at 3 profit taking levels including 143.19, 145 and 147 in the past month, based on the trading signals we shared in the group.

 

GBPJPY Resistance Challenged by Upcoming Data - Daily Chart Technical Analysis GBPJPY Resistance Challenged by Upcoming Data - Daily Chart Technical Analysis

 

However the Ichimoku indication could be exhausted at this point. With that, if the bulls are unable to break above the GBPJPY resistance on the upcoming data, we could see a pullback to Fibonacci retracement levels at 145, 143.19 and 141.79.

 

Monthly Time Frame: On the monthly chart, the pair remains below the monthly Ichimoku cloud, with the cloud acting as a resistance. The pair could also be in the process of forming a gigantic double top chart pattern.  The neckline of this potential chart pattern would fall on 76% Fibonacci retracement level at 138.42.

 

GBPJPY Resistance - Monthly Chart Technical Analysis GBPJPY Resistance - Monthly Chart Technical Analysis

2- Fundamental Points

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

 

UK Side: We have a number of economic data coming out of the United Kingdom this week. April inflation figures are up for release Tuesday at 9:30 am GMT, and are mostly expected to reflect a return in upside price pressures.  The headline Consumer Price Index (CPI)  is projected to tick up from 2.3% to 2.6% in April.

However, keep in mind that upbeat inflation readings might not be such good news for the U.K. economy this time around, especially since the Bank of England has said that the consumer sector is having a tough time keeping up with sharp price gains.

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Moreover, the UK jobs data will be out on Wednesday at 9:30 AM GMT.  This index is expected to advance from 2.3% to 2.4% for the three-month period ending in March, and a higher than expected rise could provide some assurance. Meanwhile, the difference in the number of Brits claiming unemployment benefits is expected to show a 5.0K increase. This would mean another increase in unemployment, but at a slower pace compared to the earlier 25.5K rise.

 

The data party will continue on Thursday at 9:30 AM GMT, as the U.K. retail sales figure for April is released. After tanking by 1.8% in March due to lower purchase volumes across almost all sectors, a rebound of 1.2% is expected for April.

 

Japan's Side:  The Bank of Japan (BOJ) was neutral on economic stance as of May meeting. They described economic development as “moderate expansion”, and are no longer looking to cut negative rates deeper or expand JGB purchases. The bank did however hint that an exit strategy is in the works, but they're not in a hurry to start tightening yet.

Coming up: 

  • Gross Domestic Product on Wednesday at 11:50 PM GMT. It is expected to rise to 1.8% on an annual basis.

 

 

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3- Market Sentiment

Market sentiment analysis is the 3rd point of the IDDA. Retail trader data shows that only 34.2% of traders are net-long GBPJPY. The number of traders net-long is 31.3% higher than yesterday and 10.7% higher from last week, while the number of traders net-short is 6.0% lower than yesterday and 43.0% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact that majority of  traders are net-short suggests GBPJPY prices may continue to rise. On the other hand, positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBPJPY trading bias. Which makes sense, considering all the risk events coming up. Market participants are merely speculating the upcoming data, and the GBPJPY resistance strength. 

 

 

 

Trading Strategy as GBPJPY Resistance is Challenged by Upcoming Data

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 speculating and trading before risk events. Join us in our strategy development room by becoming a member of our investing group to learn more.

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Disclaimer: 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.

 

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
140.38 143.19 147.84
141.79 145.028 152.41

 

 

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