Key Highlights
- The British Pound declined sharply after it broke the 135.20 support against the Japanese Yen.
- A crucial resistance is forming near 135.00 and a bearish trend line on the 4-hours of GBP/JPY.
- The UK Claimant Count changed 38.0K in June 2019, whereas the market was looking for 22.8K.
- The UK Consumer Price Index in June 2019 could rise 2% (YoY), similar to the last increase.
GBPJPY Technical Analysis
After struggling to clear the 137.15 level, the British Pound started a strong decline against the Japanese Yen. The GBP/JPY pair even broke the key 135.20 support level to post a new multi-month low.
Looking at the 4-hours chart, the pair turned bearish after it settled below the 136.00 support level. More importantly, there was a daily close below the 135.20 support and the 100 simple moving average (red, 4-hours).
The recent decline was such that the pair traded to a new 7-month low at 133.96. It is currently correcting losses towards the 134.75 level. However, the pair is likely to struggle above 135.00.
It seems like there is a crucial resistance forming near 135.20 and a bearish trend line on the same chart. Moreover, the 50% Fib retracement level of the downward move from the 136.05 high to 133.96 low is also near the 135.00 level to act as resistance.
Above the 135.20 resistance, the next major resistance is near the 136.00 level plus 100 simple moving average (red, 4-hours).
If there is no upside break above 135.20, the pair could continue to decline. A clear break below the 134.00 level might call for an extended drop towards the 132.00 level.
Fundamentally, the UK Claimant Count (measures the change in the number of unemployed people) report for June 2019 was released by the National Statistics. The market was looking for the count to change by 22.8K.
The actual result was disappointing as the count changed by 38.0K. Besides, the last reading was revised from 23.2K to 24.5K. On the positive side, the ILO Unemployment Rate remained at 3.8%.
The report added:
The UK employment rate was estimated at 76.0%, higher than a year earlier (75.6%); on the quarter, the rate was 0.1 percentage points lower, the first quarterly decrease since June to August 2018.
The British Pound is clearly under pressure and it seems like GBP/USD and GBP/JPY might continue to slide in the near term.
Economic Releases to Watch Today
- UK Consumer Price Index June 2019 (YoY) – Forecast +2.0%, versus +2.0% previous.
- UK Core Consumer Price Index June 2019 (YoY) – Forecast +1.8%, versus +1.7% previous.
- Euro Zone CPI for June 2019 (YoY) – Forecast +1.2%, versus +1.2% previous.
- Euro Zone CPI for June 2019 (MoM) – Forecast +0.1%, versus +0.1% previous.
- US Housing Starts June 2019 (MoM) – Forecast 1.261M, versus 1.269M previous.
- US Building Permits June 2019 (MoM) – Forecast 1.300M, versus 1.299M previous.
- Canadian Consumer Price Index June 2019 (MoM) – Forecast -0.2%, versus +0.4% previous.
- Canadian Consumer Price Index June 2019 (YoY) – Forecast +2.0%, versus +2.4% previous.
