The Japanese yen [B]extended [/B]its gains against the British pound following several numerous failed attempts to break above the key resistance level of 185.40. The GBP/JPY pair has been moving in a short-term downtrend since mid-December 2014, when the pair posted a [B]seven-year high [/B]around the 189.70 level.
Despite numerous attempts over the last few months, the pair has [B]failed [/B]to break above the short-term descending trend line, consequently forming a [B]failure swing[/B]. Failure swings are my favourite patterns. They are a clear sign of the price’s inability to reaffirm a new high in an uptrend or a new low in a downtrend, which gives us the opportunity to spot a trend reversal before most do, especially if you recognise the pattern in the early stages.
Technically and according to the daily chart, the pair is under a [B]serious correction[/B] and I expect the sellers to push the price further down towards the 175.75 barrier. This area is significant as it includes the ascending trend line, which started back in mid-2012. If the above scenario pass, then I would expect a [B]battle [/B]to take place near the 175.40 – 175.75 zone. The [B]weakness [/B]is also confirmed by our medium-term studies, since the MACD crossed below its trigger in a [B]bearish [/B]territory and the RSI is moving lower below 30. In addition, the Stochastic fell in oversold territory confirming the negative picture of the pair.
On the other hand, if the price breaks above the 180.20 barrier, which I do not foresee at the moment, resistance should be found around the 181.50 level, which coincides with the short-term descending trend line.
[B]BoE Minutes and Unemployment Rate
[/B]
The market expects the [B]MPC [/B]to vote unanimously to keep rates on hold at its March meeting. Traders expect no major change in the voting pattern despite the robust growth of UK economy.
UK Trade Balance for January released last week showing that the countries deficit narrowed significantly. BoE governor [B]Mark Carney[/B], at his last speech justified the January’s low [B]inflation [/B]of 0.3% by the external deflationary forces and boosted hopes that since UK is in a solid expansion and strong domestic demand growth, inflation will be return to the target of 2.0% in the next two years. He signaled that is looking for a possible rise in interest rates but underlined that higher pound will affect both the exports and the wages and drive down the inflation.
[B]Unemployment Rate[/B] and [B]Claimant Count Change[/B] for February, both expected to slightly decrease to 5.6% from 5.7% and -30.0K from -38.6K respectively. Since, the time of the release, is at the same time with the employment data, this may trigger some [B]volatility [/B]for the GBP.
Reported by JFD Brokers
Efthivoulos Grigoriou
Head of Global Research and Analysis
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