Bottom line: GBPJPY medium term outlook remains bullish against 124.00 lows. It might have carved a meaningful bottom around 130.00 and bulls seem to be poised to push towards 139.00, going forward.

Fundamental Outlook:

USDCHF has come under pressure since May 25, and it has dropped to 0.9630, losing over a 100 pips. The US Dollar weakness can be largely attributed to risk sentiment and equity markets that continued to rally yesterday. The SPX500 touched 3068 while Dow Jones peaked towards 25758, highest since early March 2020.

Adding further to the positive sentiment, the EU Commission also announced on the recovery funds earlier this week. Over and above the EURO 500 billion jointly proposed by Germany and France, an additional EURO 250 billion in loans exceeded market expectations.

All said and done, the US-China tensions over Hong Kong cannot be ignored. Later today, President Trump holds a press conference to brief an administrative response to China’s decision on tightening its grip over Hong Kong.

Furthermore, the US Job Market continues to worsen, as over 40 million Americans have lost their jobs since the COVID-19 epidemic broke out. A looming recession is inevitable and its impact worse than The Great Depression (1929)!

Technical Analysis:

GBPJPY bulls remain in control for now as they carve a higher low around 130.00 levels last week. This was expected as discussed earlier and the currency pair is expected to push towards 139.00 levels in the next few weeks.

GBPJPY had earlier dropped from 145 through 124.00 levels earlier. The recent rally could be a correction and it could reach the fibonacci 0.618 retracement around 138.87, before finding resistance. Only a consistent break above 142.00 would confirm that GBPJPY is headed towards 145.00.

Traders might want to remain long for now, with protective stop below 127.00 and projected targets towards 138.00/139.00 respectively. We shall review situation around 139.00 again if prices manage to reach.

Prepared by

Harsh Japee, Technical Analyst.

GBPJPY Chart

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