The GBPJPY pair went into corrective decline after it had reached a six-year high in June at a level slightly above 168.7. It’s safe to say that a midterm downward trend has been formed. But no local minima have been renewed below 160 this week – the price has made a sharp leap upward, approaching the middle Bollinger Band. And there is still some space for further growth.
Despite the Bank of England being skeptic towards the prospects of the national economy, the current statistics might sometimes be reassuring. So, the unemployment level in Great Britain has been holding steady at the level of 3.8%, and the wage growth has slowed down from 6.4% to 5.1%. In the future, it might reduce the inflation pressure, which is now still updating the records from 40 years ago.
Today’s statistics have showed the British inflation has entered the double-digit figures, raising to 10.1% by the end of July instead of the expected level of 9.8%. The probability of another hike of the key interest rate by 0.5% in September is now more than 85% after getting such data on price increase. It’s doubtful that it might help GBPJPY to reverse the current downward trend, but a short-term rise might continue.
Japanese economy, in its turn, is also showing the picture far from positive. Almost all data, such as GDP growth, service sector activity, trade balance, turned out to be worse than expected. The price increase is the only non-problematic issue at the moment. At the same time, this advantage is actually more of a disadvantage for the Japanese yen, as it allows the Bank of Japan pursuing its ultrasoft monetary policy and negative key rate.
A bullish engulfing pattern, which formed yesterday, might push the GBPJPY pair to testing a falling trend line near the level at 164.5. But to do so, it’s necessary to overcome the middle Bollinger Band, which has inevitably moved GBPJPY down since the start of August. For greater security, it’s worth to wait until the price is fixed above the level of 163, and after that open positions expecting the further rise towards the level at 164.5.
The following trading strategy is possible:
Buy GBPJPY at the close of the day above the level 163. Take profit – 164,5. Stop loss – 162,5.
It’s also allowable for traders, if they will, to use Trailing stop instead of a fixed Stop loss.
This content is for informational purposes only and is not intended to be investing advice.
