Bottom line: GBPJPY medium term outlook remains bearish against 139.00/140.00 levels. Intraday rallies remain possible but prices are expected to stay below 139.00 levels. Bears are looking poised to push through 124.00 support.

Fundamental Outlook:

USDCHF has not moved much since the NFP yesterday and is almost flat around 0.9458. The exchange rate is set to gain as the US Dollar is showing signs of a reversal. Yesterday was no different as Global Indices and risk appetite gained close to +1.0%, but DXY was quick to be back above 97.00 mark.

SPX500, Dow Jones, NASDAQ and other indices have been rallying despite a steady rise in COVID-19 infections; the US alone has seen over 50K cases on Wednesday. US-China and China-India rift has been rising as well, with more sanctions being imposed.

A similar situation prevailed in January-February 2020, when COVID-19 was spreading fast in the US and other countries. Investors were all out, calling 30K-40K in the Dow Jones; we know what followed in February-March. This time it is the NASDAQ registering new highs, history might be set to repeat!

GBPJPY has again reversed from 134.70 highs yesterday. The exchange rate is trading below 134.00 mark and is set to come under further pressure and the Japanese Yen rises. The fragile risk sentiment might reverse lower, giving a distinct edge to the Japanese Yen.

Technical Analysis:

GBPJPY bears remain under control as prices revere from 134.70 yesterday. A meaningful lower high might already be in place around 139.00/140.00 and the currency should be looking to drop towards 124.00 levels, going forward.

GBPJPY had dropped from 148.00 through 124.00 levels earlier. The rally post 124.00 lows managed to reach the fibonacci 0.618 retracement of the above drop, around 139.00/140.00 before reversing. Ideally, GBPJPY should continue lower and print fresh lows below 124.00

Most traders might have initiated fresh short positions around 139.00/140.00 with protective stop above 143.00 and projected targets below 124.00. Only a break above 140.00/142.00 would nullify the above bearish setup.

Prepared by

Harsh Japee, Technical Analyst.

GBPJPY Chart

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