gbpjpy keeps afloat above lows but downside risk remains 1794732016
<p>At the recent height of global market volatility last week, the yen had been rising at a swift clip due to accelerating asset flows towards […]</p>
Share this:
At the recent height of global market volatility last week, the yen had been rising at a swift clip due to accelerating asset flows towards the perceived safety of the Japanese currency.
At the same time, last week marked new long-term lows for the British pound against several other major currencies, including the euro, the US dollar, and the noted Japanese yen. Sterling had been dropping sharply within the past several weeks, partly due to speculation that the Bank of England’s intended rate hike might be postponed for significantly longer than expected as a result of low inflation and weak economic growth.
This combination of a volatility-driven surge for the yen along with a sinking pound prompted the GBP/JPY currency pair to plunge slightly below the 164.00 support level last week. This was its lowest level in nearly two years – since early February of 2014 – when GBP/JPY bounced off this same 164.00 support area.
The similar bounce off this level that occurred last week formed a “hammer candle,” or “pin bar,” pattern that generally gives an indication of intensified buying activity around oversold price levels, especially if it occurs near major support areas. After this pattern formed, GBP/JPY did indeed rebound in a relief rally as global stock markets stabilized late last week. That rebound reached a high above 170.00 before paring its gains.
Volatility in the equity markets returned on Monday, however, as global stock indices pulled back significantly from last week’s highs, along with another large drop in the price of crude oil.
Despite the noted hammer candle, jittery investors are still highly vulnerable to global market volatility, and the Japanese yen could continue to benefit further, pressuring currency pairs like GBP/JPY. Adding to this pressure is the steep downward spiral that the British pound has experienced and could continue to experience if the Bank of England remains as dovish as it has been recently.
Any re-breakdown below the 168.00 support level could once again target the noted 164.00 support. A further breakdown below 164.00 would then confirm a continuation of the current downtrend, with the next major target at the 160.00 psychological support level.
Related tags:
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.