Bottom line: GBPJPY medium term outlook remains bearish against the 140.00 mark. Bears have remained in control since 139.75 highs early this month. A pullback rally towards 135.00/136.00 remains possible though.

Fundamental Outlook:

USDCHF has found renewed strength from 0.9420 early this week and managed to rally past 0.9500 yesterday. The safe haven US Dollar has gained, as risk aversion returned early this week. Cases of COVID-19 infections has been rising in US and Asian countries along with a global recession looming.

The WHO has warned of another wave of COVID-19 infections across Europe. To remind our readers, this was the exact situation in January 2020. A dramatic 35% selloff in Global Markets followed in February 2020. This might not be the time to be too optimistic on risk assets.

GBPJPY exchange rate has dropped over -4.0% in the past 2 weeks as it trades around 133.00 mark. The anti-risk Japanese Yen has gained across major currencies and this could continue further. Several risk associated currencies like the EURO and Aussie Dollar has also lost against the Japanese Yen.

Technical Analysis:

GBPJPY bears seem to be in complete control since 139.75 highs. The currency pair has dropped more than 600 pips since the beginning of this month as it trades around 133.00/10 mark. A counter trend rally towards 135.00/136.00 cannot be ruled out but GBPJPY seems to heading towards 130.00.

GBPJPY had dropped from 148.00 through 124.00 levels earlier. A counter trend rally was expected from 124.00 before resuming lower again. Bulls had managed to push towards 139.75 levels, which is also the fibonacci 0.618 retracement of the earlier drop.

Most traders might have initiated short positions from 139.00/75 levels with protective stop above 140.00 and projected targets below 124.00 going forward. Only a break past 142.00 would nullify the above bearish setup.

Prepared by

Harsh Japee, Technical Analyst.

GBPJPY Chart

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