Forex Analysis:GBPJPY Support Zone Is Around 129.50/130.50

Bottom line:  GBPJPY intermediary bullish structure us here to stay until 124.00 holds goo…

Bottom line:  GBPJPY intermediary bullish structure us here to stay until 124.00 holds good. The corrective drop might push towards 130.50 at least before bulls are back in control.

Fundamental Outlook:

US Jobless claims print 4.4 million yesterday, bringing the total number of claims to over 26 million over the past 4-5 weeks. The economic instability caused due to COVID-19 pandemic is here to stay longer and the US Equity markets are beginning to show signs of another selloff ahead. An additional relief package of USD 484 billion was not enough to aid the rally.

Leaders of the European Union has agreed upon a rescue plan to help stressed economies. Over 540 Billion Euros financial aid was confirmed, which could be released from June 01, 2020. The European Commission has been tasked to finalize a plan, which is agreeable to all EU leaders, going forward.

Italian sovereign debt is to be rated by S&P today, which could add pressure to the EURO if downgraded further. Current rating is BBB with a negative outlook. The British Pound (GBP) would also be taking cues from the S&P ratings due today.

Technical Analysis:

GBPJPY has finally dropped lower from 136.00 levels as expected. It has found interim support around 131.90 levels but the slide might not be over yet. Further drop to 130.50 might complete the corrective drop since sub 136.00 levels and GBPJPY bulls might remain poised to resume rally 138.00/139.00.

Also note that fibonacci 0.382 retracement is seen around 130.60 levels, which could provide the necessary support. A break lower could reach up to 129.30, which is fibonacci 50% retracement and potential support as well.

Structurally, GBPJPY might be in a counter trend rally since 124.00 lows on March 18, 2020. The corrective phase is expected to terminate around 139.00 mark. However, a push above 143.00 could confirm further upside and a potential trend reversal.

Most traders might be preparing to initiate fresh long positions between 129.30 and 130.50 levels, with stop below 126.00 and potential target towards 138.00/139.00 respectively.

Prepared by

Harsh Japee, Technical Analyst.

 

GBPJPY Chart

 


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