Daily U.S. Session Watchlist: GBP/JPY

Daily U.S. Session Watchlist: GBP/JPY

Guppy could be setting up for big action ahead as the pair consolidates ahead of the latest monetary policy statement from the Bank of Japan and the upcoming U.K. retail sales data.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD ahead of U.K. business sentiment data, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 11182.56 -0.37%
FTSE: 6083.17 +0.26%
S&P 500: 2963.07 -0.38%
DJIA: 24590.60 +0.04%
US 10-yr 0.67% -0.009
Bund 10-YR -0.492% -0.025
UK 10-YR: 0.187% -0.043
JPN 10-YR: -0.003 -0.002
Oil: 34.44 +2.84%
Gold: 1727.10 -1.42%
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Ethereum: 202.23 -3.25%

Fresh Market Headlines & Economic Data:

  • U.S. Jobless claims total 2.4 million, still elevated levels but a declining pace from previous weeks
  • IHS Markit Flash U.S. Composite PMI: May sees further steep fall in output amid COVID-19 crisis
  • April U.S. home sales drop nearly 18%, while decline in inventory pushes prices to a record high
  • Philly Fed manufacturing index shows continued weakness in May
  • Canada sheds 226,700 jobs in April due as COVID-19 weighs: ADP
  • Canadian New home prices were unchanged at the national level in April following two consecutive monthly increases.
  • Oil at highest since March on lower U.S. inventories, recovering demand
  • Decline in German business activity eases in May
  • Weaker fall in French activity during May as firms begin to reopen after lockdown
  • Eurozone economic downturn shows signs of easing as lockdowns lift
  • UK factories report biggest output drop in over 40 years
  • Rapid downturn in UK private sector output continues in May, but
    the speed of decline eases since April
  Trade Idea: EUR/CAD Support Breakout?

Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:

  • Fed Clarida speech at 5:00 pm GMT
  • Fed Chair Powell speech at 6:30 pm GMT
  • New Zealand Retail Sales at 10:45 pm GMT
  • Japan Inflation rate at 11:30 pm GMT
  • Bank of Japan Rate decision at 3:00 am GMT (May 22)

What to Watch: GBP/JPY

GBP/JPY 1-Hour Forex Chart
GBP/JPY 1-Hour Forex Chart

Checking out GBP/JPY for today’s watchlist as both the Japanese yen and British pound are likely to see a pick up in volatility over the next session.

Japan has two top tier events ahead, the latest inflation read and the monetary policy decision from the BOJ, to kick things off for Guppy. It’s not a given that we will get volatility from these two events, but if there is a big surprise from expectations (expected to hold the rate at -0.10%, present new program to help businesses), then it’s likely the yen will get moving.

In the upcoming London trading session, the U.K. will release the latest retail sales data, likely to show a big month-over-month drop of around -15%, much bigger than the ugly -5% drop in the previous month.

In terms of price action, the pair is currently trending lower, as seen on the one hour chart above.

There is a pretty clear pattern of lower ‘highs’ that actually goes back to mid-April, so the odds are in favor of the bears at the moment as that falling trend line is retested and Stochastic indicates potentially short-term overbought conditions.

For Guppy bears, if the BOJ surprises with an extremely supportive package for coronavirus hit businesses and UK retail data disappoints, then watch out for bearish patterns around the falling ‘highs’ pattern before considering a short-term or swing position on GBP/JPY.

For the bulls, if the market is disappointed with what the BOJ’s support package for businesses and UK retail sales data isn’t as bad as the -15% m/m drop, then watch for a potential break above the falling ‘highs’ for a momentum trade and/or swing long position.

  GBP/USD Forecast: Resuming the rally? Not so fast, three reasons to expect a downside correction

With a daily ATR of around 150 pips, a target of the next resistance area around 133.00 is an achievable one if momentum can stay strong into the weekend.

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