Forex Market: GBP/JPY daily trading forecast

Yesterday’s trade saw GBP/JPY within the range of 193.95-195.09. The pair closed at 194.12, down 0.36% on a daily basis. On Tuesday the cross went up as high as 195.35, or a level unseen since June 24th, when it registered a daily high of 195.93.

At 6:47 GMT today GBP/JPY was up 0.13% for the day to trade at 194.38. The pair tested the range resistance level (R3), as it touched a daily high at 194.54 at 5:25 GMT.

Today the cross may be influenced by a number of macroeconomic reports as listed below.

Fundamentals

United Kingdom

Retail Sales

Annualized retail sales in the United Kingdom probably rose at a rate of 4.4% in July, according to the median forecast by experts, after in June sales increased by another 4.0%. If so, this would be the 28th consecutive month of sales growth and also the sharpest rate of increase since May, when retail sales climbed at an annualized rate of 4.6%. In monthly terms, retail sales probably increased 0.4% in July, following an unexpected 0.2% drop in June. If so, this would be the sharpest monthly rate of increase since April, when the index surged 1.2%. Annualized retail sales, without taking into account fuel sales, probably rose 4.3% in July, following a 4.2% surge in June. If so, this would be the 39th consecutive month of growth in annual core sales.

This is a short-term indicator, which provides key information about consumption on a national scale. Higher retail sales suggest stronger consumer demand, confidence and economic growth, respectively. Therefore, in case the index of retail sales increased at a faster-than-expected pace, this would be pound positive. The Office for National Statistics is expected to publish the official report at 8:30 GMT.

Bond Yield Spread

The yield on Japanese 2-year government bonds went as high as 0.009% on August 19th, or the highest level since August 17th (0.009%), after which it closed at the exact same level to gain 0.002 percentage point on a daily basis.

The yield on UK 2-year government bonds climbed as high as 0.628% on August 19th, or the highest level since August 10th (0.648%), after which it fell to 0.547% at the close to lose 3.9 basis points (0.039 percentage point) for the day.

The spread between 2-year UK and 2-year Japanese bond yields, which reflects the flow of funds in a short term, narrowed to 0.538% on August 19th from 0.579% during the prior day. The August 19th difference has been the lowest one since July 9th, when the yield spread was 0.534%.

Meanwhile, the yield on Japans 10-year government bonds soared as high as 0.381% on August 19th, after which it slid to 0.375% at the close to lose 0.002 percentage point compared to August 18th. It has been the second straight trading day of decrease.

The yield on UK 10-year government bonds climbed as high as 1.901% on August 19th, or the highest level since August 14th (1.906%), after which it slipped to 1.830% at the close to lose 4.3 basis points (0.043 percentage point) on a daily basis.

The spread between 10-year UK and 10-year Japanese bond yields narrowed to 1.455% on August 19th from 1.496% during the prior day. The August 19th yield difference has been the lowest one since August 17th, when the spread was 1.426%.

Daily and Weekly Pivot Levels

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

R1 – 194.22
R2 – 194.33
R3 (range resistance – green on the 30-minute chart) – 194.43
R4 (range breakout – red on the 30-minute chart) – 194.75

S1 – 194.02
S2 – 193.91
S3 (range support – green on the 30-minute chart) – 193.81
S4 (range breakout – red on the 30-minute chart) – 193.49

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