GBP/JPY & BoE: Weakness to Be Viewed as Opportunity
- GBPJPY to face-off with BoE - constructive above 133.20
- Updatedtargets & invalidation levels
Chart Created Using TradingView
Broader Technical Outlook: GBPJPY broke above slope resistance on the first of the month before reversing off the median-line of a pitchfork formation extending off the Brexit low. The pullback has continued to respect this slope as support with our broader focus still weighted to the topside while above 133.21/32- this region is defined by the 100% extension of the decline off the monthly high & the Brexit swing low and converges on former trendline resistance extending off the July high into the close of the week.
We’ve been tracking this setup on SB Trade Desk for the past few weeks and we’ll be looking for a pullback to offer favorable long entries. Key resistance stands at 137.89-138.10 (61.8% retracement & the post-Brexit July high-day close) with a breach there targeting the median-line / 78.6% retracement at 140.27.
Notes: The pair is trading within the confines of a near-term descending median-line formation extending off the monthly highs with the exchange rate reversing sharply off confluence resistance today at 136.60/65. Look for interim resistance at the monthly open at 135.84 with our immediate focus lower while within this formation.
Interim support rests at 134.45 with a break lower targeting 133.95 & key confluence support at 133.21/32- both areas of interest for possible exhaustion / long-entries. From a trading standpoint, heading into tomorrow’s Bank of England (BoE) interest rate decision I would be looking to fade weakness into structural support. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Desk and take advantage of the DailyFX New Subscriber Discount.
- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net longGBPJPY- the ratio stands at 1.90 (66% of traders are long)- bearish reading
- Long positions are 12.1% below levels seen last week while Short positions are 32.3% lower over the same time period
- Open interest is 7.7% lower than yesterday and 19.1% below its monthly average.
- Current retail positioning keeps the immediate focus lower but note that traders have been net-long since April with SSI hitting a 2016 extreme in July as it topped out at +3.38. Nevertheless, waning open interest suggests a broader shift in sentiment may be underway with the short bias at risk as the exchange rate approaches support.
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Relevant Data Releases
Other Setups in Play:
- NZD/USD: Bearish Bias Intact as FX Sentiment Narrows Ahead of GDP
- GBP/USD: Constructive Above 1.3155- Buy the Dip Setup into UK CPI
- Webinar: FX Majors In the Crosshairs as Seasonals Turn Against USD
- NZD/USD 2016 Rally at Risk Sub-7500 as Sentiment Stretches
Looking for trade ideas? Review DailyFX’s 2016 3Q Projections
---Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.