Political storms from Great Britain and Europe helped the GBP/JPY’s bearish trend resume with additional momentum yesterday.
The GBP/JPY saw a surge of risk-averse trading develop yesterday, and the forex pair which traded near a high of 137.350 two days ago now is testing important support levels. Speculators have been confronted by choppy trading in the GBP/JPY mid-term. When a one-year chart is gazed upon by technical traders it can be concluded the forex pair is rather comfortably within the middle of its value range.
However, since the second week of March the GBP/JPY has consistently seen a strong dose of bearish trading mixed with strong reversals higher. Seemingly at the peak of risk appetite on the 1st of September, the Japanese Yen was near high watermarks of 142.00, but as investors began to show sign of caution on global equity indices, the GBP/JPY generated risk-averse momentum and hit a value of approximately 133.40 on the 22nd of September.
Trading on equity exchanges including the Nikkei has resumed better footing the past week, but concerns remain about direction. The big mover within the GBP/JPY yesterday and the reason for the sudden swell of bearish momentum were unofficial government quotes from the European Union. Officials from the EU suggested to members of the media they are not going to cave in to the UK’s Prime Minister Boris Johnson’s demands. The EU government officials let it be known they would essentially dare the Prime Minister to break away from Brexit negotiations which have hit yet another major disagreement.
This public rupture via the EU and UK caused a stir in the forex markets and the bearish trend of the GBP/JPY found swift momentum downwards. However, after the forex pair recovered its footing a support level of 136.100 seems to have been established.
Speculators have seen a rather wide range in the GBP/JPY since late September as the forex pair has traded between 135.250 and 137.400. The question is if the turbulence from UK and EU political squabbles has been fully digested into the forex market now? The answer is no because the real outcome is unknown, but nevertheless, optimistic investors also believe it is likely both sides will find some way to move forward which will not cause economic chaos.
Speculators who believe risk appetite will stay strong globally may believe the GBP/JPY has been oversold short term. Buying the GBP/JPY on slight pullbacks that approach support and looking for upside movement may be a worthwhile task today.
GBP/JPY Short Term Outlook:
Current Resistance: 136.650
Current Support: 136.100
High Target: 137.200
Low Target: 135.850