Beyond the Turmoil: Decoding GBP/JPY's Bullish Path

The GBP/JPY has been consolidating in a narrow range between 199.97 and 197.89 for the past week. It hit an intraday low of  198.55 and is currently trading around 198.95.  Intraday trend is bullish as long as support 197.85 holds.

The recent upper house election in Japan has set off severe political instability, thereby devaluing the yen as the governing coalition lost its majority and now struggles with legislative gridlock. Trade conflicts with the US and the diminishing probability of a near-term Bank of Japan rate rise further damage investor confidence in spite of constant inflation. Though the yen experienced a brief safe-haven rise following the election, increased fiscal growth risks, outstanding trade problems, and growing economic uncertainty indicate this support would be temporary. The yen's future still appears gloomy overall since political and policy instability eclipses any short-term benefits from safe-haven inflows.

The GBP/JPY pair is trading above  55 and 200 EMA (Short-term) and 365 EMA (long-term) on the 4-hour chart, confirming a bullish trend.  Any violation below 198.50 indicates the intraday trend is weak. A dip to 198/197.70/196.70/196.25/195.25/194/193.70 is possible.  Immediate resistance is at 200 a breach above this level targets of 200/202/204.

Market Indicators (4-hour chart)

CCI (50)- Neutral

Directional movement index - Bearish

Trading Strategy:  Buy

 
 It Is good to buy on dips around 198.70-75 with SL around 197.70  for a TP of 202.