GBP JPY Price Action Building a Base
Sterling Talking Points
- JPY rally has calmed although Asian holidays are likely behind the consolidation today.
- GBP will seek strength from UK employment and wages data and Bank of England commentary.
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GBPJPY is Forming a Base Ahead of its Next Move
The recent GBPJPY sell-off from the February 2 high of 156.62 to the February 14 low of 147.950 has abated with traders looking for guidance for the next move. The low print of 147.950 also coincided with the 50% Fibonacci retracement level of the August 2017 – February 2018 move and is likely to provide short-term support ahead of the next retracement level at 145.923. On the upside a break and close above 150.000 would open the path to 152.535 although a cluster of EMAs between 150.900 and 151.700 may offer secondary resistance.
Traders also need to be aware of any Brexit commentary that is coming out with UK PM Theresa May expected to outline her ‘Road to Brexit’ in the next couple of weeks, one of six speeches by UK Brexit officials that will give more detail of the UK’s future relationship with the EU.
GBPJPY Price Chart Daily Timeframe (August 2017 – February 19, 2018)
Economic Calendar is Light
Looking at the week ahead, the economic calendar is light although a couple of notable data releases and BoE speeches need monitoring. Bank of England governor Mark Carney speaks Monday evening in London, after the UK has officially closed, while governor Carney will be back in front of the microphone along with three other MPC members on Friday early-afternoon. In the data space UK wages and unemployment on Wednesday will need to be watched closely, as will the latest Japanese inflation print on Thursday.
Clients Net-Long of GBPJPY
IG Client Positioning data show 65.5% of traders are net-long with the ratio of traders long to short at 1.9 to 1. The number of traders net-long is 13.9% higher than yesterday and 73.0% higher from last week, while the number of traders net-short is 4.1% lower than yesterday and 11.4% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPJPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPJPY-bearish contrarian trading bias.
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--- Written by Nick Cawley, Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.