Market News & Analysis


Top Story

Pound becomes strongest major currency

By far the strongest major currency has been the British pound today, which has actually overtaken the Canadian dollar to become the best performing major currency year-to-date. Who would have thought this would happen at the beginning of the year? Well, the pound has stormed back to life in recent months owing to growing optimism that the Brexit stalemate could finally end. That’s because opinion polls point to a majority win for Prime Minister Boris Johnson’s Conservatives Party. If the polls are to be trusted and they do end up winning, the Tories will have enough seats to pass the Brexit bill through parliament and officially exit the EU on 31st January. At last, there will be some certainty, even if the real work will then start: trade negotiations. However, if the polls get this wrong again and Conservatives fail to win majority then a lot could go wrong for the pound. For now, though, the markets are trusting the polls and the pound dips are being bought.

Yen undermined by return of risk appetite

Among the pound crosses to watch, the GBP/JPY is catching my attention. Not only has this pair been boosted by the rebounding sterling, but also by improved appetite towards risk which has weighed on safe haven yen and gold. Unless Labour manages to sharply close the gap with the Conservatives or sentiment towards risk takes a big U-turn, the GBP/JPY stands ready to gain further ground as the elections nears.

GBP/JPY resolves consolidation by breaking out

Source: Trading View and City Index.

Technically, GBP/JPY’s lengthily consolidation since mid-October has finally been resolved today with the bulls once again coming out on top. The Guppy has finally broken above the 1.5 month-old consolidation range, potentially paving the way for the resumption of the bullish trend that has been in place since rates double bottomed in early September.

With the recent resistance area around 141.80 broken cleanly today, any future retreat back to this area could be defended by the bulls. There is also a shorter term support seen around the 142.00 handle.

Levels where things could potentially go wrong for GBP/JPY bulls

On the upside, a potential resistance level or bullish target to watch is around 143.80, a level which was formerly support. Here, there is also a long-term bearish trend line coming into play. This trend line is derived from connecting the previous significant high in February 2018 with the March 2019 peak, and extending the projected line into the future.

Meanwhile, if the abovementioned 141.80-142.00 support range fails to hold on a potential pullback, then there is a risk we may see a trend reversal — at least in the short-term. Indeed, the short-term bullish outlook would become completely invalidated should rates break back below today’s low around 141.84, for this would mean a failed breakout attempt. If that were to happen then the bears may target liquidity that would be resting below the aforementioned range, sub 139.30 area.


From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.