During the previous week, GBP/JPY crashed dramatically to close the week in more than 350 pips loss. In case you are wondering what triggered the sell-off, let me help you with it. It was the release of Japanese GDP figures. The Japanese economy expanded quicker than originally estimated in the fourth quarter as capital expenditure staged a swift recovery from a series of natural disasters in the previous quarter.
As per the actual estimates, the Japanese GDP (gross domestic product) surged at an annualized rate of 1.9% in October-December, higher than the initial forecast of a 1.4% annualized growth rate. That followed a revised 2.4% annualized decrease in the third quarter, which was the highest drop in more than four years. This enhanced the sentiment about the Japanese economy and stoked faith that the Bank of Japan won’t reduce the interest rates further.
- In case, the fundamentals aren’t enough, you can take a look at the technical side of the market. Let’s break them into bullet points:
- The GBP/JPY pair is facing strong support around 143.740. The same level supported the pair back on Feb 22.
- On the 4-hour chart, GBP/JPY has opened the market with a bullish marubozu pattern which apparently signals a bullish sentiment of the market.
- The oversold pair can stay bullish above 143.750 to complete 38.2% retracement at 145 and 50% retracement at 145.520.
- The bearish breakout of 143.750 level can extend bearish rally until 142.950.
Key Trading Level: 144.93
The idea is to stay bullish 143.750 with a stop loss below 143.450 and take profit around 145.450.