GBPJPY Fuelled by Risk-On Move
GBPJPY News and Talking Points
- GBP remains underpinned by solid economic fundamentals and positive Brexit backdrop.
- JPY strength may return in the medium-term.
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GBPJPY Caught Between Moving Averages
The recent bout of risk-off sentiment drove GBPJPY down to just under 145.000, its lowest level since September 2017, despite a positive set-up in GBP as US trade war fears roiled markets. A brief respite in market sentiment has seen the pair trade back up to 149.00 and back above its 20-day moving average. The pair now sit just below the 50-day ma at 149.70 and the longer 100-day ma at 150.90, while the stochastic indicator sits mid-market.
A lack of any heavyweight data for either currency this week – UK final Q4 GDP on Thursday aside - leaves any potential GBPJPY move driven squarely by risk sentiment, namely the ongoing trade war spat between the US and China. While a further rebound in GBPJPY may look likely, especially with all the recent GBP-positive news, the speed of the risk sell-off seen last week points to further market turbulence ahead and may see the Japanese Yen appreciate further.
GBPJPY Price Chart Daily Time Frame (October 9, 2017 – March 26, 2018)
Retail Traders Net-Long of GBPJPY
Retail trader data show 53.6% of traders are net-long with the ratio of traders long to short at 1.15 to 1. In fact, traders have remained net-long since Mar 16 when GBPJPY traded near 148.155; price has moved 0.1% lower since then. The number of traders net-long is 8.9% lower than yesterday and 10.2% lower from last week, while the number of traders net-short is 11.2% lower than yesterday and 21.0% 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.