GBP/JPY Targets 196

GBP/JPY Targets 196

GBP/JPY Targets 196

We like GBP/USD and we like USD/JPY, which makes GBPJPY one of our favorite trades. This is a historic week for the British pound because for the first time ever, the Bank of England will deliver its monetary policy announcement, release the minutes from the meeting and its Quarterly Inflation Report at the same time on “Super Thursday”. Forty five minutes later, BoE Governor Carney will hold a press conference. We know that the head of the U.K. central bank tends to maintain a hawkish bias and most likely more than 1 MPC member will vote in favor of a rate hike. At the same time today’s HOT ISM non-manufacturing report drove the dollar sharply higher and will have the market positioning for a strong NFP report.

Technically, GBP/JPY has broken above the July high of 194.60. The next area of resistance is right below 196, where the currency pair consolidated mid June. After that, 200 is in focus because not only is it a key psychological level but also the 61.8% Fibonacci retracement of the 2007 to 2011 decline. However if GBP/JPY breaks below 193, it could sink down to 190 at which point there is a risk of a double top. With that in mind we don’t think the uptrend will break.

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