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The UK
Generally, the good news is returning to the GBP as the economy shows signs of normalcy as the covid-19 death rate and infection rates continue to drop and businesses are getting closer to reopening fully. Over the weekend an experimental music festival could go ahead, with the experimental part being the study of interactions between the attendees and the effect this has on covid-19 transmission rather than the music itself. This could be the beginning of getting the entertainments/arts/services/tourism industries back online which forms a massive part of the overall UK economy.
The GBP across the board is strengthening whereas the Japanese yen is weaker. This could be a sign that the safe-haven status of the yen is not currently required but more likely it is due to the worsening conditions of economic activity within Japan itself. They are still mid-lock down across major cities as they try and suppress the covid-19 rates before the summers Olympics.
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Last week I identified a possible short squeeze in the GBPJPY and the first part of sweeping the highs of the recent swing high was confirmed, though in retrospect we had a slightly larger pullback following the liquidity grab than I had anticipated.
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We are now back on track with the GBPJPY likely to test higher again continuing with the daily bullish momentum. The price is above the daily 50 and 200 ema’s and the space in-between these significant moving averages is important showing the perceived strength currently in this pair.
The sentiment on the ActivTrader platform remains decisively bearish with 65% of traders looking to continue shorting the currency pair against the dominant trend, which is fuel for the 35% of bulls who should see an acceleration in their position as these bears get the hint that the uptrend is still in play.
I will change my outlook on the pair should we start seeing a daily close below the 50 ema or should we see a bearish reversal below a recent daily swing low which would occur currently at the neckline of the Head and Shoulder pattern on the daily chart.
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The GBPUSD is slightly higher today and the USDJPY is also accelerating higher confirming the pound strength versus the yen’s weakness. This week there is some key data for the British pound with Final Manufacturing PMI data tomorrow, and the Bank of England delivering their policy statement and MPC official rate on Thursday.
Golden Week
Japan is also respecting their Constitution Day Bank holiday today, with 2 more holiday days tomorrow and Wednesday as part of their Golden Week, with little else on the economic calendar Thursday and Friday.
