Good day forex friends! On today’s chart spotlight is the daily time frame of the guppy (GBPJPY). As you can see, buyers have bought up the British pound after it had fallen to a low of 126.731 against the Japanese yen. The pair has since retraced after finding some support at 128.00 and at the bottom of the channel. At present, the pair is trading around 135.00 though in my view it could soon reverse and head back down. Why? Well, the 135.00 psychological resistance is almost in line with the 61.8% Fibonacci retracement level, making it a tougher hurdle to overcome. Moreover, the stochastics are indicating that conditions are almost overbought. This suggests that sellers could soon jump in to push the pair low. If and when the GBPJPY moves past the 135.00 level and the 61.8% Fib, it could continue moving north until it hits a wall at 139.00 or at the channel’s top. On the dimmer note, the pair could once again turn south back to 129.00 or even at the descending channel’s support if the pound selling resumes.
The GBPJPY pair has rebounded from its 2010 low thanks to some profit taking actions or short covers and the recent weakness in the JPY. The yen’s recent decline was due to the political turmoil in Japan. Just yesterday, Prime Minister Yukio Hayotama resign from his position after receiving a lot of criticisms from the government’s opposition and even its political ally, the Social Democratic Party, when the former unduly fired Mizuho Fukushima, the leader of the said party, when she disagreed with the former’s decision to move a US military base to a different location. The disagreement between the two led the Social Democratic Party to sever its allegiance with the government. Receiving a lot of pressure from majority of Japan’s citizen, the Prime Minister was then forced to resign. This has left the country searching for a new leader with a vision. Now, risk appetite in the Japanese market could soon return when the country places a new front-man in its government. Once this happens, the yen could then regain its appeal.
Outside Japan, the market’s sentiment remains bearish because of several factors like the ongoing debt crisis in Europe, threat of a Korean War 2.0, and the devastating oil spill in the US. These issues are dead proofs that the global market is still far from being stable. Until the stands up and recovers its footing, periodic weakness could still be felt among the non-dollar currencies like the pound which consequently benefits the safer ones like the JPY.