Like it or not, the flight to the relative safety of the JPY is a dominant theme for traders today. After yesterday’s plunge in the stocks, today is not much better. The Nasdaq is down 3.32% in 2015. The S&P is down 2.82%. The Euro Stoxx is down 4.4% in the first few days of the year.
GBPJPY falls by 1.5%.
The GBPJPY is one of the worst performers in trading today – falling by 1.50% (snapshot). Weaker UK data today is a negative in addition to the flight to safety flows into the JPY. The combination helps to explain the intense weakness in the pair.
GBPJPY daily chart looks toward the 100 day MA and the 50%
Technically, the price fell below the 38.2% retracement of the move up from the October 2014 low to the December 2014 high. That level came in at the 181.406 level. The move lower has a pair now looking toward what should be key support against the 100 day moving average at 178.88 (blue line in the chart above) and the 50% retracement of the same move up from the October low to the December high. That level comes in at 178.846. Adam spoke to this level also in his post from 3 hours ago (he is always well ahead of me!). See: GBP/JPY technicals putting pressure on sterling
Typically, with both the 100 day moving average and 50% retracement level at virtually the same price, you would expect good support on the 1st test (if not even before reaching that level). The low today has reached 179.299, and we are seeing the rebound higher as stocks recover some of their losses (Dow is down 175 after being down 200) in volatile trading. Be aware of this level. It should be a temporary cause for pause in the pair.
Looking at the 5 minute chart, the market should stay below the 38.2-50% of the last leg lower in the trend move down today. The 50% of that move also corresponds to the initial day low (at 180.33 area). Note that the correction off that low went up around 50% (nice hold ) before heading back lower. In a trend move, seeing the 38.2-50% levels hold is a sign that the sellers remain in control.
Much depends on the stocks but they are not looking all that great either.
The GBPJPY 5 minute chart.