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Pound holds against G3 currencies

Market Analysis

GBPJPY, H1

Sterling has lifted over the last week, showing an average 0.7% gain versus the G3 currencies over this period. UK Chancellor Hammond has been pushing the case for a post-Brexit transition period, negotiations for which he said could start as soon as September. This gives the markets some faith that government will avoid a Brexit “cliff edge” scenario, where the UK would abruptly leave the single market and customs union in March 2019, adopt WTO tariffs and rules and suffer a consequential instant deterioration in its terms of trade. A transition period would allow the necessary time for new trading agreements to be made with the EU. Even hard line Brexit supports have acknowledged this would be a good idea, and the EU will likely be open to it as well.

Cable rallied to levels not seen since September last year while the pound has been managing to hold its own versus the euro. It also manage to recover last week’s losses against yen. The GBPJPY just manage to lifted above yesterdays high up to 146.53. In the 4 hour chart, the pair appear to have confirmed the Tweezer bottom in the morning and followed with 3 white soldiers to close ahead of US open, while it broke above the recent fractal low. GBPJPY moves since Tuesday in the upper Bollinger bands area.  Meanwhile in an hourly chart a cross of the SMA has been noticed with 50-period MA crossed above 200-period MA, which suggest further strength intra-daily. The parabolic SAR remain positive in both time-frames, while RSI are both around 60, with further steam up to overbought area.

A Long position was taken based on these two short time-frames, with entry at 146.40,  and hourly targets at 146.70 and 146.90 ( 23.6 Fibonacci level in the 4-hour chart). A breach and break of the recent fractal low at 1.4540 will negate this position, hence Fractal low was set as a Support level for our entry.

2017-07-27_13-25-51

 

 

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Andria Pichidi

Market Analyst

HotForex

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