Published: August 18th, 2021
The Japanese economy is doing better, while the Q2 Prelim GDP showed a better result than the previous quarter. Despite the current outbreak of the Covid delta variant, the Japanese economy is stable. Industrial production improved by 6.5% in the last quarter while the Tertiary Industry Activity remains supportive.
On the other hand, the UK CPI disappointed by coming at 2% year over year from 2.5% in the previous quarter. However, the UK economy remained stable in the post-pandemic situation where the vaccination rate was more substantial than other major countries. Moreover, the recent increase in infection rate in Britain with no urgency of tightening the monetary policy is a sign of profit takings by GBP bulls. In this situation, GBPJPY has a higher possibility to show bearish momentum in the coming days. However, investors should closely monitor how the price is showing a correction from the current bearish leg.
Let’s see the upcoming price direction from the GBPJPY technical analysis:
GBPJPY begins 2021 with a massive bullish pressure that stopped after reaching the second half of the year. The price made a strong bullish daily close at the beginning of June but failed to overcome the 156.00 barriers. Therefore, sellers joined the market and became aggressive after moving below the 151.40 event level. Later on, the price tried to move higher but failed to break the 151.40 barriar. Therefore, as long as the price is trading below this level, we may expect an expansion to the current bearish pressure in the coming days.
In the daily chart, the price moved lower below the dynamic 20 EMA with a bearish close that shifted the trend from corrective to impulsive bearish. Since the beginning of this week, the price maintained the bearishness but increased the possibility of a bullish correction.
In the indicator window, MACD Histogram is still bearish and making new lows, pointing out a sign of active sellers in the price. In this market context, a bullish correction is pending towards the dynamic 20 EMA from where sellers may regain momentum.
According to the Ichimoku Kinko Hyo, GBPJPY H4 is trading on the sellers’ territory as the price is below the Kumo Cloud and dynamic Conversion & Baselines. Moreover, the future cloud is bearish where the Senkou Span A is below the Senkou Span B and moving lower. Besides, Chikou Span is also supportive as it is below the price of Kumo Cloud and price.
In the H4, the scenario is different despite the price being below the Kumo Cloud. The above image shows the Indicator window where the RSI line moved higher from the potential oversold zone of 30 levels. Moreover, the price moved below the Kijun Sen line with a big gap, opening room for a bullish correction as a mean reversion.
Therefore, based on the H4 context, the price is more likely to move towards a 151.67 resistance level in the coming sessions. However, investors should closely monitor how the price reacts from the Kijun Sen. Any bearish pressure from the 151.67 level, or dynamic Kijun Sen may resume the current bearish pressure. On the other hand, a strong bullish H4 close above the Kijun Sen may increase the price towards the 152.50 level.
In the intraday chart, GBPJPY is within a definite bearish trend where the price moved above the intraday high volume level for the first time it started moving lower from 153.40 key level. Therefore, the most recent bearish trend became questionable that increased a buying possibility.
The above image shows that the price moved above the dynamic vwap level but still below the dynamic 20 EMA. Moreover, in the indicator window, MACD Histogram is bullish and making new highs. In this context, a bullish H1 close above the dynamic 20 EMA may increase the intraday buying pressure towards the 151.67 level in the coming sessions.
On the other hand, a strong bearish H1 close below the intraday high volume level of 150.57 and dynamic vwap may continue the current bearish pressure towards 150.00 level.
As per the above discussion, we can say that the GBPJPY has a higher possibility to initiate a bullish correction towards the 151.67 event level. On the other hand, the intraday price is above the vwap where a bearish H1 close below the 150.57 level may take the price lower towards the 148.00 area.