Forex Video Briefing (9/9) – GBP/USD, GBP/JPY
GBP/USD’s decline has been so sharp we need to take a look at the weekly chart. In terms of yearly volatility GBP/USD is getting there. Cable is also approaching a key level at 1.60. which is where the 200-week simple moving average AND the key Fibonacci Retracement level of 50% is marked.As the weekly RSI tags 30, and shows oversold condition, we should see some support here around 1.60. If the reaction after the Bank of England is decisively bearish, we might want to give this support some elbow space down to the 1.59 which was a more common support throughout the years. Perhaps, we can finally see some consolidation here as 1.60 seems to be a sticky price level. The upside however should be limited to the 1.63 support/resistance pivot area. Now if the bank is ultra dovish AND the Scottish independence movement becomes more realistic, we might not see the consolidation around 1.60 that we saw in late 2013 and late 2012. We might see price dip toward the 61.8% retraecment at 1.5721 down to 1.57 , which was a previous resistance area in the 2013.
While the Sterling pound has been weak since July this year, the Japanese yen has been soft since 2012, after the BoJ announced that it wanted to double its monetary base through stimulus measures. However, in 2014, Japanese yen has been holding off the bullish attack from GBP. Although GBP/JPY made a fresh high on the year at 175.36 in July, it has fallen back to 170. The market is testing a previous support pivot around 169.50, and is just above the 50-week SMA. The weekly chart still shows a bullish GBP/JPY, so it will have to take an ultra-dovish BoE inflation report to shift this uptrend. If the reaction brings GBP/JPY below 169.00, then the bearish outlook might have some life to it, at least toward the 163.87 low on the year. However, if after all is said and done this weak, GBP/JPY remains above 170.00, we have to entertain the possibility that it is still neutral-bullish, and the 175.36 high on the year will still be in sight.