Trading plan for 22/01/2019:
In the absence of other topics, investors express fears over global recovery and shift focus away from risky assets. The stock markets are dominated by the bearish trend.
Gloomy mood fueled the latest IMF report, which reduced global growth forecasts for 2019 and 2020, justifying the decision with lower than expected growth in China and the eurozone. According to the IMF, unsuccessful attempts to alleviate tensions may further destabilize the global economyIn Asia, the falls were dominated by the Chinese market, where Shanghai Composite loses 1.4 %. In Japan, Nikkei225 fell 0.5%.In the currency market, we have the classic signs of an increase in risk aversion. TheyJPY and USD gains and commodity currencies lose - most of all AUD, NZD and CAD.
On Tuesday, the 22nd of January, the event calendar is busy with the important data releases. The UK will post Claimant Count Change data, Average Earnings Index data and Public Sector Net Borrowing data. Germany will release ZEW Survey data, together with the eurozone. Canada will post Wholesale Sales data and the US will present Existing Home Sales data.
GBP/JPY analysis for 22/01/2019:
The UK will release the Claimant Count Change figures. The UK Claimant Count provides data on those individuals who are out of work and who are claiming some sort of unemployment benefit. The market participants expect the numbers to decreases from 21.9K a month ago to 20.1K. The Average Earnings Index is expected to remain unchanged at the level of 3.3% m/m.
In the other news, the British Prime Minister, Theresa May, promised that she would be more open to the parliament during further Brexit negotiations. During her speech in the House of Commons, she did not provide a clear plan for further action to avoid backstop. It also refused to completely exclude the option of leaving the EU without an agreement but is opposed to postponing Brexit and repeating the referendum. Despite this, GBP gained in value after the speech, as investors hope that May may be forced to compromise. Failure to present the details of plan B may become a catalyst for taking over control of negotiations by the parliament.
Let's now take a look at the GBP/JPY technical picture at the H4 time frame. The market is about to test the key technical support zone located between the levels of 140.45 - 140.68 with the old 50% Fibo retracement level on the middle of it at 140.55. All of these levels makes the support strong and any violation of this zone will have an immediate consequence.
The bearish scenario assumes a sell-off towards the next technical support at the level of 138.47, but if the bulls will defend the zone well, then the bullish scenario assumes a bounce from this zone and uptrend resumption towards the swing high at the level of 142.23. This is why is worth to keep an eye on this level and join the winning side of the market.
