Another Day, Another Poll
Joe Perry November 27, 2019 2:56 PM
Guardian Journalist Owen Jones said today that YouGov MRP Poll shows a significant Tory majority, citing “source”. Journalist Jones also noted that the margin is narrowing, and if continued at the same pace in the next week, would indicate a hung parliament. This follows polls released yesterday and Monday, which my colleague Ken concisely boiled down yesterday. Markets seem to be ignoring the part about the hung parliament, and instead are focusing on the significant Tory lead. Combine that with a little “risk on” in stocks, and a weak JPY, and we have the makings of a potential breakout in GBP/JPY.
GBP/JPY put in lows on August 12th and September 2nd, creating a double bottom. Price traded higher since then and halted between the 61.8% Fibonacci retracement level from the highs on March 13th to the lows on August 12th near 140.38 and the horizontal resistance near 141.00 forming a potential flag/pennant formation. Price has broken through the 141.00 level and closed today at its highest level since May near 141.50. If GBP/JPY breaks above 141.70, it will have broken above the flag and we can start looking at a potential target near 150.00.
Source: Tradingview, FOREX.com
On a 240-minute chart, it is easy to see the flag range that GBP/JPY has been in since mid-October, however Monday and today have been extremely strong days. Price gapped open on Monday at 139.70 from a close of 139.57 on Friday. Since the opening on Monday, price seems to be forming a possible AB=CD harmonic formation, where the length of wave AB equals the length of wave CD. That would bring price to the top of the channel. If GBP/JPY breaks through this resistance zone, it may easily squeeze through the top of the flag near 141.70 (see daily).
Source: Tradingview, FOREX.com
The focus on this pair over the next few weeks will be twofold. First, the release of headlines regarding the upcoming elections and new polls will drive this pair as that seems to be the only thing GBP traders are watching into December 12th. Secondly, Yen traders are focusing on the US-China trade war. If the headlines are positive, or if a deal gets signed, USD/JPY should trade higher with risk, which should bring GBP/JPY higher along with it.
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