GBP/JPY survived Friday’s NFP number with a spike higher on the data release, and then a slow fade lower. Not a very large movement for a pair that is traditionally quite volatile. Similar to the US Equities markets, the traders of GBP/JPY took the NFP number with mixed emotions. But a look at the longer-term technicals points towards the pair rolling over for a steep drop.
When we laid a set of Bollinger Bands (“BB”) over a chart of GBP/JPY with 2 hour candles, we noted that the pair has not held any breaks of the upper BB in the last week. Yet it keeps testing the lower boundry. We also noted the formation of a clear channel with lower highs and lower lows all through last week. (We added some channel lines to the chart below)
So even though the equity markets did not fall hard on Friday, and seem to be keeping their positive tone, it looks to us that GBP/JPY is rolling over and heading lower.
While we do not have a specific trade recommendation at this point in time, we have changed our bais on GBP/JPY towards a move lower. We will keep this view in mind as we look for short-term opportunities in the next few days.
Stay Nimble!
Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com
Thanks to FX Sol and Accucharts for the below image.
