Ichimoku Kinko Hyo CNH/JPY: The CNH/JPY pair is trading above the Kumo…
GBP/JPY: upward headwinds
Information is not investment advice
As we do not look at GBP crosses that often, it makes it even more interesting to see the disposition that is created in GBPJPY since recently.
On the weekly chart below, we may distinguish three elements that shape the situation.
From the downside, we have the range of 125.00 – 127.00 giving clear support to the movement of the pair since late 2016 (marked “1”). During recent years, it was touched once in the summer of 2019 and spring 2020 – both cases saw GBPJPY bounce upwards.
From the upside, we have a long-term downtrend descending to the ranges of 142.50 since February 2018 (marked “2”). In the meantime, April gave rise to a new uptrend (marked “3”) that is opposing the bearish pressure and meets it exactly at the heights of 142.50. It’s not a coincidence that these tectonics collide at 200-MA at the same resistance level.
Although the price went down to 139.50 recently, that may well be just a mid-term retrace – the true battle is at 142.50/200-MA. Either we will see the GBP win over JPY crushing the long-term trend and climbing above 142.50, or it will go sideways below the resistance/bounce downwards. Both scenarios will only be confirmed in the course of several weeks from now as we are observing strategic moves. At this moment, keep in mind that bulls are in the red zone of tilting the strategic disposition – they will have to fight through a lot of fundamental headwinds from Brexit to make it higher.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.