Runs up toward 200 hour MA before Carney testimony tomorrow/BOE later this week.
The GBPJPY - like some of the JPY pairs - are enjoying trend like buying today. Technically, the pair made a break above the 100 hour MA (at 130.90 currently) and moves toward the 200 hour MA at 133.852. The high today has extended to 133.70. It currently trades at 133.63 - right near that level.
The North American session has seen more up and down activity with higher lows and higher highs. However, there has been a slowing of momentum as the topside resistance looms (see 5-minute chart below). Nevertheless, the buyers remain in control.
The action today is step one in a recovery.
The problem for traders is that BOE's Carney testifies tomorrow and the the BOE is to meet this week on Thursday. Carney has said that additional stimulus "will likely be required over the summer". The market has penciled in a chance for an easing on Thursday, and it would make sense that they are proactive "just in case". That idea sent the GBP screaming lower last week against all currency pairs. The GBPJPY traded at the lowest level since November 2011 last week (low of 128.70).
However, traders today are questioning, "Is the moves lower in the major GBP pairs enough to have done the easing for the BOE, in which case they can hold off and see what happens" and/or "Is a cut all ready priced in already?. In which case, there may be a dip, but that dip should be bought."
The FTSE likes the GBP weakness. It trades at the highest level since August 2015. The UK 10 year bond is at 0.75% - lowest level on record.. The PM handover seems to have gone as smoothly as possible.
In Japan the talk is of additional stimulation.
So in trading today, all that pointed to a higher GBPJPY and today we have seen that.
Will the selling flows reverse for good now? We saw some of it today. The rally higher today is justified - if not just because there has been a lot of stimulus and you never know what Carney/BOE will say or do.
Going forward though, the technicals and perhaps some "monitoring the impact" comments from Carney are needed to get the next leg going. All ears will be on Carney and all eyes will be on the charts. .
Technically, the 133.75-85 should be a tough level to get through (we are knocking on the level now). Maybe there is another run that gets above the level and it triggers stops. If it holds (we just got to 133.70), look for a break of the trend line on the 5-minute chart and a test of the 100 bar MA on the same chart as the traders do their A-B-C's on a corrective move lower. A move below the 100 bar MA, looks for an even deeper correction of today's activity.
What we do know is the event and liquidity risk will be sky high tomorrow. So plan accordingly for the fireworks.
