Forex Market: GBP/JPY daily trading forecast

Friday’s trade saw GBP/JPY within the range of 193.78-194.64. The pair closed at 194.46, up 0.11% on a daily basis and extending gains from Thursday. In weekly terms, the cross appreciated 1.02%, which has been the most considerable weekly gain since the week ended on July 19th, when it surged 1.62%.

At 9:53 GMT today GBP/JPY was up 0.17% for the day to trade at 194.69. The pair overcame the upper range breakout level (R4), as it touched a daily high at 195.16 at 6:30 GMT. It has been the highest level since August 6th, when a daily high of 195.28 was reached.

Correlation with Major currency pairs

Taking into account the week ended on August 16th 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 USD/CAD (0.8738, or very strong)
GBP/JPY to USD/JPY (0.8611, or very strong)
GBP/JPY to USD/CHF (0.7550, or strong)
GBP/JPY to GBP/USD (-0.4310, or moderate)
GBP/JPY to EUR/USD (-0.6578, or strong)
GBP/JPY to AUD/USD (-0.7004, or strong)
GBP/JPY to NZD/USD (-0.7820, or strong)

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

2. GBP/JPY moved strongly in the opposite direction compared to EUR/USD, AUD/USD and NZD/USD during the past week.

3. GBP/JPY moved strongly in one and the same direction with USD/CHF during the period in question.

4. The correlation between GBP/JPY and GBP/USD was moderate.

Bond Yield Spread

The yield on Japanese 2-year government bonds went as high as 0.007% on August 14th, after which it slid to 0.006% at the close to lose 0.001 percentage point on a daily basis.

The yield on UK 2-year government bonds climbed as high as 0.604% on August 14th, after which it fell to 0.578% at the close to add 1.9 basis points (0.019 percentage point) for the day, while marking a second consecutive trading day of gains.

The spread between 2-year UK and 2-year Japanese bond yields, which reflects the flow of funds in a short term, expanded to 0.572% on August 14th from 0.552% during the prior day. The August 14th difference has been the most considerable one since August 10th, when the yield spread was 0.617%.

Meanwhile, the yield on Japan’s 10-year government bonds soared as high as 0.389% on August 14th, or the highest level since August 11th (0.420%), after which it slid to 0.380% at the close to lose 0.006 percentage point compared to August 13th.

The yield on UK 10-year government bonds climbed as high as 1.906% on August 14th, or the highest level since August 10th (1.931%), after which it slipped to 1.879% at the close to add 4.4 basis points (0.044 percentage point) on a daily basis, while marking a second consecutive day of gains.

The spread between 10-year UK and 10-year Japanese bond yields widened to 1.499% on August 14th from 1.449% during the prior day. The August 14th yield difference has been the largest one since August 10th, when the spread was 1.514%.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for GBP/JPY are presented as follows:

R1 – 194.54
R2 – 194.62
R3 (range resistance – green on the 30-minute chart) – 194.70
R4 (range breakout – red on the 30-minute chart) – 194.93

S1 – 194.38
S2 – 194.30
S3 (range support – green on the 30-minute chart) – 194.22
S4 (range breakout – red on the 30-minute chart) – 193.99

By using the traditional method of calculation, the weekly pivot levels for GBP/JPY are presented as follows:

Central Pivot Point – 193.91
R1 – 195.61
R2 – 196.75
R3 – 198.45

S1 – 192.77
S2 – 191.07
S3 – 189.93