Forex Analysis:GBPJPY Finds Interim Support At 134.50 Handle

Bottom line: GBPJPY long term outlook remains bullish against 124.00 lows in March 2020. T…

Bottom line: GBPJPY long term outlook remains bullish against 124.00 lows in March 2020. The currency has dropped to 134.50 levels after hitting resistance around 143.00 mark early this month. A push towards 138.00/50 might be possible before finding resistance.

 Fundamental Outlook:

USDCHF is holding above its 0.9000 lows carved earl this month. The exchange rate is trading close to 0.9080/85 levels as we prepare to publish and is expected to remain well bid over the next several weeks. The US Dollar Index (DXY) might be indicating further strength as it holds above 91.75 mark. Further, a return in risk aversion might only add to the US Dollar strength.

GBPJPY has dropped over 800 pips since 142.72 highs on September 01, 2020. The exchange rate had dropped through 134.50 yesterday before finding some bids. The Bank of England has keep rate decision unchanged to 0.1% and might be thinking to implement a negative interest rate policy.

The dovish stance by BoE, possibility of a hard or No-Brexit deal and fears of a second wave of COVID-19 infections might keep the exchange rate under pressure. GBPUSD had also dropped from its 1.3483 highs early this month to 1.2760 lows before finding some bids.

Technical Analysis:

GBPJPY bears have remained in control since hitting 142.72 highs early this month. The currency had dropped to 134.50 lows yesterday, more than 800 pips from its September highs. It has found some relief and has pulled back through 135.80 for now as bulls might be preparing for at least a correction.

GBPJPY had hit potential resistance around 143.00 mark, and since then has remained in control of bears. Earlier, the currency had dropped from 148.00 through 124.00 levels before reversing higher again. It remains to be seen if the recent drop is corrective or towards a new low below 124.00.

Immediate support is seen just below 132.00 mark and the recent upswing is between 132.00 and 143.00 levels respectively. Until now, GBPJPY seems to have retraced to fibonacci 0.618 levels of the above rally towards which is seen around 135.00/136.00 zone.

Also note that GBPJPY has managed to unfold a hammer candlestick pattern on the daily chart. It might be indicating a potential bullish bounce, at least a corrective rally. Most traders might be willing to initiate fresh longs around 135.00/50 levels, with stops below 134.50 and targeting 138.00/50 mark.

Prepared by

Harsh Japee, Technical Analyst.





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