Investing.com - Financial Markets Worldwide

Market Roundup: GBP/JPY Teasing For A Breakout

ByMatt Simpson
Published 05/01/2014, 04:29 AM
GBP/JPY
-0.71%

Market Roundup


Market Roundup Chart

  • AUD import prices and smashed expectations at 3.2% to see the Aussie trade above 0.930 following the release and break the bearish channel. Currently trading at 0.9293 and appears bullish on intraday timeframes.
  • JPY domestic auto sales down -11.4% y/y
  • CNY manufacturing came in soft at 50.4 vs 50.5 expected

UP NEXT:
Upcoming Events

  • Bank holiday for EUR and CHF so lower volumes can be expected during NYLON session
  • UK PMI is forecast slightly higher over last month however we have seen 4 consecutive declines from the manufacturing index to suggest a top is in place. The closer to 50 we get the more negative an impact GBP pairs will suffer, with a shock number below 50 no doubt providing fireworks (and celebrations for GBP bears).
  • FED Chair Lady Yellen will be closely monitored by the markets to see if any clues slip regarding timing for interest rate hikes. I expect extra volatility but no particularly directional moves from the speech.
  • US Unemployment claims whilst may provide some volatility, should be fairly muted compared to tomorrow's NFP but if it comes in positive I suspect we'll see USD bullishness priced in prior to NFP.
  • US Manufacturing is the last red news event tonight. We have seen 2 consecutive increases with a 3rd expected, so any disappointment should see USD Index remain near weekly lows.

Pairs to Monitor: USD, GBP, Gold, GBP/JPY, Indices

DAX: Eyeing up bullish breakout

GER30 Daily Chart

The S&P 500 and DJI are edging near their record high, seemingly pending a bullish breakout, with European stocks also about to benefit from the improved investor confidence both sides of the water. While Eurozone continues to be concerned with deflation, the German economy is the one propping it up. Additionally, if weaker numbers continue to appear across the Bloc then this increases the chances of ECB stimulus, which should be interpreted by the markets as bullish for stocks.

The DAX has confirmed a swing low at 9381 and since produced 3 consecutive bullish days, closing just shy of the ‘neckline’ of the suspected Inverted Head and Shoulders pattern. As long as we remain above the 9381 swing low I am confident we will see a bullish breakout sooner than later. Since the 8909 swing low of 14/03/14 (The ‘Head’) we have now seen two consecutive swings lows with increased buying volume, each testing the sloping resistance line to suggest it is only a matter of time until we see lift-off. If we do see a failed breakout and price retrace below 9381 then I suspect we’ll see a deeper pullback to the lower bullish channel around 9120-25


GBP/JPY: Teasing the neckline for a breakout

GBP/JPY Daily Chart

The Inverted Head & Shoulders pattern projects an approximate target at 183, but for now I will target 179 as this is a historical support/resistance level.

Price is teasing the neckline and produced an intraday bullish breakout yesterday, only to close the session just beneath it again. It cannot stay on the neckline forever, so regardless of which way it break, it is very much a ‘finger on the button time’ for traders. A characteristic with yen crosses is their ability to trade in complicated, choppy and sideways corrections (such as the suspected head and shoulders pattern we are witnessing now) before shifting into a parabolic trend at the push of a button. In fact we witnessed a similar pattern on the GBP/JPY Sep-Nov ’13 before catapulting +1500 pips out of the continuation pattern. With any luck we will see a repeat of this soon.

If we can remain above 171.20 swing low then I suspect to see this parabolic shift soon and for price to target 179.0. A break below 171.20 swing low raises the potential for a deeper pullback to 169.4 swing low (and around the lower bullish channel). Under this scenario the pattern will have to be reassessed, but overall I see no immediate reason to be calling any major tops in the GBP/JPY any time soon.

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.