Fundamental Overview:
GBP/JPY is expected to trade in a higher range. It is supported by the negative JPY sentiment. The recent data pointing to a struggling Japanese economy suggest the Bank of Japan may yet provide more stimulus increasing demand from Japanese importers. But GBP/JPY gains are tempered by Japanese export sales and uncertainty related to the referendum for Scotland's independence. Bank of England Gov. Carney warned on Tuesday that a currency union between England and independent Scotland would be incompatible with sovereignty. Besides, we should note wider-than-expected U.K. July global goods trade deficit of GBP10.2 billion (versus forecast GBP9.3 billion) and sterling sales on buoyant EUR/GBP cross. But GBP sentiment is soothed as Mr. Carney also signaled that a rate hike could be expected in spring; U.K. July industrial production is increased stronger-than-expected 0.5% on month and +1.7% on year (versus forecast +0.3% on month, +1.4% on year).
Technical Comment:
The daily chart is mixed as MACD and stochastics are turning bullish but five and 15-day moving averages are still meandering sideways.
Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As long as the price is keeping above its pivot point, a long position is recommended with the first target at 171.75 and the second target at 172.35. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 169.25. A break of this target would push the pair further downwards and one may expect the second target at 168.55. The pivot point is at 170.50.
Resistance levels:
171.75
172.35
172.75
Support levels:
170
169.25
168.55
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