Latest dynamics on the world stock markets forced investors to seek safe-haven assets such as the Frank, Yen and the USD.
After its growth from the level of 118.00 since 2012, the pair GBP/JPY nearly reached 61.8% Fibonacci correction at 197.80 but the outbreak of the problems in the Eurozone and in China reversed the trend. The pair lost 600 points from the beginning of July. Today’s Asian markets rebound allowed the pair to gain some losses.
On Friday, Domestic Corporate Goods Price index for June is due in Japan at 2:50 am (GMT +3). At 11:30, Trade Balance data for May is due in the UK. These releases should be accounted for when making trading decisions as price volatility is expected.
Fundamentally, the GBP is more attractive than the Yen due to the difference in interest rates and monetary policies. Once the financial markets are stabilised, the pair growth is going to continue.
Support and resistance
On the daily chart, the pair found the support level at 184.85 (EMA144). Below is another strong support level at 183.00 (EMA200 and 50% Fibonacci). The downward correction might not be over yet and the pair could yet test 182.70.
On the 4-hour chart, OsMA and Stochastic have turned to signal sell. On the daily chart, they still give buy signals.
Before opening long positions, wait for the current correction to end and the indicators to give appropriate signals. On the 4-hour chart, OsMA histogram should cross the zero line from bottom to top and Stochastic should remain in the buy zone. On the daily chart, OsMA needs to start rising and Stochastic should leave the oversold zone.
Support levels: 184.85, 182.70.
Resistance levels: 189.25, 191.00.
Open long positions from 184.85, 182.70 with targets at 189.00, 191.00, 194.00, 195.50 and stop-loss at 181.80. Recommendation length – until the end of the week.
Open short positions after the breakdown of the level of 181.00 with targets at 176.30, 175.80, 169.70.