Forex Market: GBP/JPY daily trading forecast

Friday’s trade saw GBP/JPY within the range of 191.60-192.51. The pair closed at 192.09, down 0.08% on a daily basis and extending losses from Thursday. The daily low has also been the lowest level since July 14th, when the cross registered a low of 190.53. GBP/JPY lost 0.82% during the week ended on July 26th, which has been the most considerable weekly drop since the week ended on June 28th, when the pair plunged 1.98%.

At 12:46 GMT today GBP/JPY was down 0.47% for the day to trade at 191.22. The pair broke the daily S1 and S2 levels and touched a daily low at 191.02 at 11:15 GMT. It is now the new lowest level since July 14th.

Correlation with Major currency pairs

Taking into account the week ended on July 26th and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

GBP/JPY to GBP/USD (0.9294, or very strong)
GBP/JPY to USD/JPY (0.7014, or strong)
GBP/JPY to AUD/USD (0.5467, or strong)
GBP/JPY to USD/CHF (0.0604, or very weak)
GBP/JPY to USD/CAD (-0.2719, or weak)
GBP/JPY to NZD/USD (-0.4782, or moderate)
GBP/JPY to EUR/USD (-0.7605, or strong)

1. During the examined period GBP/JPY moved almost equally in one and the same direction with GBP/USD.

2. GBP/JPY moved strongly in the opposite direction compared to USD/CAD, while moving strongly in one and the same direction with USD/JPY and AUD/USD during the past week.

3. The correlation between GBP/JPY and USD/CAD was insignificant.

4. GBP/JPY and USD/CHF moved in an almost independent manner during the period in question.

Bond Yield Spread

The yield on Japanese 2-year government bonds went as high as 0.008% on July 24th, after which it slid to 0.006% at the close to lose 0.002 percentage point on a daily basis, while marking a third consecutive day of decrease.

The yield on UK 2-year government bonds went as high as 0.646% on July 24th, after which it slid to 0.619% at the close to lose 2.7 basis points (0.027 percentage point) on a daily basis. It has been the first loss in the past four trading days.

The spread between 2-year UK and 2-year Japanese bond yields, which reflects the flow of funds in a short term, shrank to 0.613% on July 24th from 0.624% during the prior day. The July 24th difference has been the lowest one since July 16th, when the yield spread was 0.598%.

Meanwhile, the yield on Japans 10-year government bonds soared as high as 0.416% on July 24th, after which it slid to 0.415% at the close to lose 0.003 percentage point) compared to July 23rd.

The yield on UK 10-year government bonds soared as high as 1.983% on July 24th, after which it slid to 1.947% at the close to lose 6.9 basis points (0.069 percentage point) compared to July 23rd, while marking a third straight day of decrease.

The spread between 10-year UK and 10-year Japanese bond yields narrowed to 1.532% on July 24th from 1.579% during the prior day. The July 24th yield difference has been the lowest one since July 8th, when the spread was 1.443%.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 192.07. In case GBP/JPY manages to breach the first resistance level at 192.53, it will probably continue up to test 192.98. In case the second key resistance is broken, the pair will probably attempt to advance to 193.44.

If GBP/JPY manages to breach the first key support at 191.62, it will probably continue to slide and test 191.16. With this second key support broken, the movement to the downside will probably continue to 190.71.

The mid-Pivot levels for today are as follows: M1 – 190.94, M2 – 191.39, M3 – 191.85, M4 – 192.30, M5 – 192.76, M6 – 193.21.

In weekly terms, the central pivot point is at 192.58. The three key resistance levels are as follows: R1 – 193.55, R2 – 195.02, R3 – 195.99. The three key support levels are: S1 – 191.11, S2 – 190.14, S3 – 188.67.