Today in the European trading session, the GBP/JPY currency pair successfully extended its previous session bullish trading moves and hit the two-weeks high around 135.70 marks mainly due to the on-going Brexit optimism, which eventually underpinned the Brtish Pound and contributed to the currency pair gains. Apart from this, the currency pair got an additional boost after the Bank of England (BoE) policymaker reduced the possibility of negative interest rates in the short-term, which also benefitted the British Pound and extended further support to the currency pair.
Let me remind you that the combination of factors helped the currency catch some aggressive bids on the 2nd-day of a new trading week and build on last week’s modest bounce from the lowest level since early July 133.00 marks. Across the pond, the strong rally in the equity markets, backed by the combination of factors, undermined the safe-haven Japanese yen and gave a further boost to the GBP/JPY currency pair.
Despite concerns about the coronavirus cases in some notable nations and worsening US-China relations, the investors continued to cheer the hopes of the US fiscal stimulus package triggered by reports suggesting that the US Democrats’ showed a willingness to alter previous proposals while saying that the deadlock over the much-awaited stimulus talks seems to break anytime. This, in turn, boosted the market trading sentiment and extended support to the currency pair.
Moreover, the upbeat market sentiment was being supported by optimism over the coronavirus vaccine, which came after the US pharmaceutical giant Johnson and Johnson Inc COVID-19 vaccine trial has shown a strong immune response to the coronavirus with a single dose in the early trial stages.
The UK and EU are ready to resume the 9th and final phases of Brexit talks on the day across the pond. Reports suggest that negotiators will start the process to finalize a deal by the end of this week to hammer out an agreement in time for the next EU summit in mid-October. However, the hopes of a Brexit deal were further fueled after the EU steps back from warnings to leave trade and security talks, shows a willingness to prepare a joint legal agreement. (WAB). This, in turn, boosted the sentiment around the British Pound and extended further support to the currency pair.
Looking forward, the market traders will keep their eyes on headlines concerning Brexit, pandemic, and the US Presidential Election, which may offer important clues on the day. It’s worth mentioning that the 1st-round of the US President Election debate is expected to use American President Donald Trump’s tax payments as a fresh obstacle, which may push the US dollar down.
The GBP/JPY pair has formed bullish engulfing candles on the 4-hour timeframe, suggesting a bullish bias around 135.150. The recent bullish crossover of 135.100 levels is likely to lead the GBP/JPY price towards 136.400 levels. On the further higher side, the bullish crossover of 136.400 level will make our forex trading signal more secure, and it can lead GBP/JPY price towards 139.900 level. Check out a trading plan below…
Entry Price – Buy 136.056
Stop Loss – 135.656
Take Profit – 136.456
Risk to Reward – 1:1
Profit & Loss Per Standard Lot = -$400/ +$400
Profit & Loss Per Micro Lot = -$40/ +$40
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