Bottom line: GBPJPY had dropped to 130.67 levels yesterday and might have formed an intermediary low for now. Bulls might remain poised to push higher towards 138.00/139.00 levels before deciding further direction.
Fundamental Outlook:
GBPJPY may come under further pressure and drop towards 129.00 levels, after Bank of England keeps rates unchanged but warns of a severe slump in Q2 GDP and Unemployment rates. The GBPUSD exchange rate had also dropped to 1.2266 before pulling back.
The BoE projects Q2 GDP to further drop by over 25% and Unemployment to rise by 9%. Such figures have never been seen since the “Great Frost” in 1709.
USDCHF might remain under pressure as another round of dismal US Job data is expected to be released today at 0830 AM EST. The Non-Farm Payrolls are set to print -22million, while the Unemployment rate to drop to -16%. The US Dollar is set to remain under pressure against its counterparts.
More than 30 million Americans have lost their jobs in the past few weeks over the COVID-19 pandemic lockdown effect. Also, the IMF forecasts for US GDP in 2020 stands around -5.9%, along with an overall slump in the World GDP by around -3%, paints a gloomy picture.
Technical Analysis:
GBPJPY has dropped to 130.60 levels, in line with our expectations since last several trading sessions. We were expecting prices to test 129.00 levels before resuming higher again, but the currency has complete minimum expectations at 130.60 for now. Bulls are set to remain in control and push towards 139.00 levels going further.
Structurally, GBPJPY might have bottomed at 124.00 levels and could produce a long term trend reversal pushing towards 148.00 levels, going forward. Alternately, it might be producing a counter trend rally towards 139.00 levels, before reversing lower again. Either way, probability remains for a rally towards 139.00 levels.
Most traders might be now willing to remain long with protective stops just below 130.50 and projected targets towards 139.00 respectively, going forward. We shall again review price action when GBPJPY reaches 139.00 levels.
Prepared by
Harsh Japee, Technical Analyst.
GBPJPY Chart
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