Trend: Up
GBP/JPY Outlook: Some sideways move before further upward movement.
Please refer daily currency charts and not short-term charts e.g. hourly Forex charts.
GBP/JPY - Fundamentals (Recent economic releases):
1. UK: GDP data same as forecasts but much better than the previous release.
2. UK: Net Lending to individuals data much better as compared to the previous release as well as the forecasts.
3. UK: Barclays Plc revised its forecasts for GBP against the Euro and US Dollar for short- term downside risks increase.
4. UK: A factory index in the U.K. dropped to a 10-month low.
5. Japan: Trade Balance data releases less as compare to previous releases but adjusted Trade balance much better than the forecast.
6. Japan: Release for Tankan index of sentiment for large manufacturers quite positive as compared to the previous release as well as the forecasts.
7. Japan: Tankan Non-Manufacturing Index and Outlook releases positive as compared to the previous release as well as the forecasts.
8. Japan: Industrial Production preliminary releases negative as compared to the forecasts but generally quite positive as compared to the previous releases.
9. Japan: Large Retailers' Sales data negative as compared to the forecasts but much better than the previous release.
10. Japan: Retail Trade (YoY) release negative as compared to the forecasts but much better than the previous release.
11. Japan: Housing Starts data very positive as compared to the previous release as well as the forecasts
12. Japan: The jobless rate fell to 5.1 percent in August from 5.2 percent in July.
13. Japan’s Prime Minister Naoto Kan said he is prepared to resume selling the country’s currency to prevent it from strengthening.
GBP/JPY- Technical and market perception:
1. Daily MACD line crossed below the signal line while 3-hourly MACD line crossed above the signal line. These as well as the MACD histogram are indicating some volatile sideways movement with a bearish outlook.
2. ADX: +DI line crossing –DI line up and below time and again while ADX much below 25. Indicates some non-directional movement.
3. Ichimoku Cloud: GBP/JPY had broken above the resistance of the upper edge before a fall. The currency pair had found support at the lower edge of the cloud and tried to move over the upper edge of the cloud but fell sharply again.
GBP/JPY Analysis/Outlook: The fall from the psychological level of 135 continued during previous week but GBP/JPY found support exactly at the support level of July 22nd.
We expect some extended sideways movement. On the downside if GBP/JPY falls below 130.80, we would expect more support in the range of 130.10/130.40. In case this support level is broken then we would expect some more fall towards 129.20 first and then towards the recent low of 127.63.
On the upside the resistance levels of 133.76 and then 135.05/135.20 need to be watched. The possibilities of intervention by Bank of Japan should work in favor of upward movement after initial sideways move.
Overall we expect that GBP/JPY should move up after the initial sideways movement. A break over 135.20 should take GBP/JPY towards 137.00 first and then 137.75. Strong resistances are expected in that area. A break over 137.75 will make the currency pair to target 141.50 in the coming days.
Approach for trading/Strategies for GBP/JPY: With overall neutral outlook initially, we will be buying at downward movements, considering the support and resistance levels mentioned above.
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