New Season, New Market Phase?

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New Season, New Market Phase?

10:00 AM EST

Well, well. The last day of summer is behind us and we just entered a new season with today’s New York market open. The question of the day on my weekly Japanese TV guest appearance on  ワールドマーケッツ was “Have we entered a new market phase?” Here is a summary of what went down before Labor Day and what to watch out for this week.

Economic Points

US Maintains Slow Growth

The August  non-farm payrolls (NFP) reading turned out to be a disappointment, as the U.S. economy added only 173,000 jobs during the month instead of the projected 225,000 increase. However, the jobless rate still managed to make a notable improvement from 5.3% to 5.1%. That’s its lowest level since the dark days of the financial recession in April 2008!  So, it is safe to say that US economy remains in the positive phase, albeit slower growth than expected.

The effect on the US dollar (aka Ms. USA)? More range with a slight chance of upside.

Japan’s Slowdown Lighter than Thought

China posted disappointing export data while Japanese GDP indicated that the slowdown in their economy was lighter than initially thought, which would usually be construed as a positive. Japan’s GDP contracted at -1.2% in the 2nd quarter of this year.

This better-than-expected GDP revision out of Japan shows that the Japanese economy is contracting less than originally thought, and this may be construed as removing pressure from the Bank of Japan for increasing future stimulus; while the disappointing export data out of China could make it more likely to see additional actions out of Chinese regulators.

The effect on the Japanese Yen (aka Mr. Yen)? More range with a slight chance of downside.

Bank of England Rate Statement Coming Up

Mr. British Pound is one of the few currencies who seems to be on the verge of a phase change. With Bank of England (BOE) interest rate statement coming up towards the end of the week, the forex market participants seem have started a new bullish sentiment on the Pound. No actual changes to interest rates and asset purchases are likely to be announced, but this event could still pack a punch since the monetary policy meeting minutes will also be released right there and then.

Technical Analysis

With this, let’s take a look at the GBP/JPY forex dance floor. The pair seems to have completed a double top candlestick chart pattern on the daily chart, and now moving back up testing the neckline and an important resistance level of 185. A break above this level could confirm a sentiment change with first bullish target set at 187 with with 190 in extension. 

Alternatively, failure to break above the pivot level,will bring the pair back to further drops towards support levels of of 180 and 176.50 in extension. 

Alternative Scenario

From a long term percpective, a break below 1.22 would change our outlook to bearish with 1.1950 as first alternative target

Suggested stops and limits

Support Levels Turning Point Resistance Levels
1.28 1.3250 1.3450
1.22 1.30 1.37

*Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.