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The GBPJPY price broke out of the consolidation higher after the UK Prime Minister Boris Johnson announced that lockdown restrictions will be lifted on June 21st.
Will the trend now continue higher?
Today, we’re going to take a look at GBP/JPY as the price recently surged higher.
Daily timeframe
The risk-on sentiment in the market pushed JP Yen to some weakness. We knew that the JP Yen was weak, but we expected it to gain some strength this week. But it hasn’t happened yet. The JP Yen continues to drop.
We had a strong rally in the equity market, which usually sees a sell-off in JP Yen. This has been a huge surge, especially on GBP/JPY, because the GB Pound also caught some bids recently when Prime Minister Boris Johnson said that England may need to wait until June to open all establishments. Meanwhile, the vaccination program is being successfully rolled out in some areas.
The GB Pound strengthened off the back of those news. There were some worries around the GB Pound because of the rise in virus cases in some parts of the UK, including the variant from India.
So we saw a huge surge in the GB Pound, while the JP Yen continues to weaken. And we saw a really strong bullish breakout today.
The GBP/JPY was interesting because of the squeeze pattern forming. When markets do that, we usually get a breakout next.
We don’t typically know when, and where the price will break out. It depends on the strength and weakness, but we knew the GB Pound is quite strong.
The GBP/JPY price broke out of the consolidation higher for multiple reasons. UK Prime Minister Boris Johnson announced that lockdown restrictions will be lifted on June 21, as planned. This, combined with the rally in the equity markets has seen JPY weaken further, causing a breakout higher.
Seeing a breakout to the upside could offer us trending opportunities. If the price pulls back into the previous structure high at 154.50, then we could see some long opportunities on GBP/JPY.
The daily timeframe trend looks like it will continue. If the price comes back to test the previous structure support at 154.50, buyers could step back in.
The market consolidated, and a good analogy for this is when you roll up a tube of toothpaste, you know the lid is eventually going to pop off, and the toothpaste is going to burst out.
That’s the analogy I use when I look at squeeze patterns. The price squeezes into the corner of the pattern, then it breaks out to the upside. So, that’s what we see on GBP/JPY.
But, the UK is looking to lift restrictions. Between the GB Pound climb, the JP Yen fall on the risk-on rally, and seeing the strong equity markets, GBP/JPY looks like it will be a good buy on-trend opportunity.
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