Bottom line:  GBPJPY intermediary uptrend would continue until prices stay above 124.16 lows. The counter trend rally is expected to correct lower towards 128.50/129.00 levels before resuming rally.

Fundamental Outlook:

Optimism over anticipated agreement by OPEC members, fail to stop a near 20% drop in Oil.

Oil prices had risen by over 7% yesterday just before the scheduled meeting of OPEC members. As expected, an agreement was reached by Russia and Saudi Arabia to end the price war. It was agreed to cut production by over 23% over the next 2 months. Surprisingly, Oil prices dropped by over 20% after the news, before recovering back.

Global Markets continue north alongside Dow Jones and SPX500, after Fed injects $2.3 trillion.

Markets remained broadly unaffected after the dismal Job Data (6.6 million filed for benefits). This was due to Fed announcing a $2.3 trillion stimulus, to support the economy. Right after the announcement, the Dow Jones and SPX500 rallied towards 24000 and 2820 respectively before pulling back. It remains to be seen how long the party continues for Global Equity Markets.

Today’s Events:

1. 0830 AM EST USD Consumer Price Index, to print lower around 1.6% versus 2.3%
2. 0830 AM EST USD Consumer Price Index Ex Food and Energy 2.3% versus 2.4%

Technical Analysis:

GBPJPY might have completed the first leg of its 3 wave counter trend rally that had begun since 124.08 lows on March 18, 2020. The rally has stalled just below the fibonacci 0.50% retracement around 136.06 levels. This could be termination of Wave A, within a potential A-B-C rally towards 138.00/139.00 levels, going forward.

Most traders might be willing to book profits on the long positions taken earlier and remain flat, as GBPJPY prepares to retrace lower towards 128.00/129.00 levels. Bulls are again expected to regain control around the above support levels.

Overall, GBPJPY remains in a counter trend rally and could take a few trading days or weeks to reach 138.00/139.00 levels to terminate.

Prepared by

Harsh Japee, Technical Analyst.

GBPJPY Chart

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