GBP/JPY remains in bearish trend despite sterling resurgence ahead of Brexit
James Chen, CMT March 23, 2017 3:52 PM
Against the yen however, sterling strength has been relatively muted due to a recent surge in the Japanese currency as geopolitical and market risks have helped increase demand for the yen’s perceived safety. As a result, the GBP/JPY currency pair has continued to follow a bearish trend that has been in place for more than three months, despite the pound’s recent resurgence.
Although much of the market concerns over Brexit consequences have diminished and/or have already been priced-in to the lagging pound in the past several months since the UK’s June referendum, many unknowns still remain as to how the UK’s economic landscape will unfold as the process of separation begins in earnest. Article 50 will be triggered next week on March 29th.
In addition to Brexit, other near-term geopolitical risks in Europe and the US, which include the upcoming French presidential elections and ongoing issues surrounding the US Trump Administration, could lend to some further support for the safe-haven yen.
Amid these fundamental market risks that have persisted in placing pressure on GBP/JPY, the currency pair continues to follow a falling trend line that extends back to the mid-December high around 148.00. Furthermore, price action has recently been trading in a relatively tight range between its key 50-day and 200-day moving averages, which suggests that the currency pair remains in consolidation and could be poised for a breakout move as the noted market risks unfold.
Ahead of these risks, the directional bias for GBP/JPY continues to lean towards the downside, in-line with the prevailing medium-term trend. If the currency pair continues to respect the noted downtrend line, a clear short-term downside target is at the key 137.00 support level, which is also in the vicinity of the noted 200-day moving average and the 50% retracement of the October-December uptrend.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.