GBPJPY downside
The medium term case for GBPJPY weakness remains. Here is the rationale for the case.
GBP weakness
- The UK has until the end of June to reach an agreement on an EU-UK trade extension. It seems that COVID-19 delays are not enough to automatically grant an extension. As a result, if no extensions is agreed by the end of June deadline, this opens up the possibility of a hard brexit. This is GBP bearish.
- As long as the chatter around negative interest rates remain then this keeps bears with the finger on the trigger for shorting the GBP
JPY strength
The JPY is the go to risk off currency and has been strengthening lately on the pre- FOMC jitters. There are multiple reasons for potential JPY strength going forward. They include the following:
- US/China tensions
- China Australia trade tensions
- Euro relief fund rejected by the frugal four
- Brexit
- Global pick up in COVID-19 deaths as cases of death accelerate
- The dreaded second wave of COVID-19
Entry
Pullback entry would be here as marked on the chart as long as the trade conditions remain the same
Sell on stop scalping entry would be as follows. Traders looking for the trendline to break could try a sell on stop at 136.35 risking 20 points and trying a total of three times for the break. Since writing this post yesterday the FOMC has pushed it into play. So, an alternative now is to sell a retest of the trendline at 136.60 with a tight stop above at 137.20
