GBP/JPY on verge of deep correction, eyes BoE

GBP/JPY on Tuesday closed at 171.68 with a shooting star originating from 76% fib level. The pair had printed a lower high in previous wave on daily chart that shows medium term downtrend in price.

At the moment of writing in Asian session the pair is being traded at 171.97, thus testing a key fib level. Immediate resistance is seen around 172.36, swing high of yesterday daily candle, ahead of 173.11 which is a decisive resistance. A break above 173.11 would turn our bias into bullish and target shall be 174.83 in that case.

On downside support is seen around 171.24 ahead of 170.69 which is 50% fib level. I however expect a little extended correction keeping in view a long winning streak over a past few weeks (provided that 173.11 resistance remains unbroken) just as shown in above daily chart.

So in light of above mentioned price action signals there seems a good opportunity to gain some healthy pips through a short trade. Opening a sell position at current level with a stop loss above 173.11 and targeting 169.50 ahead of 168.31 can be a good option.

Talking about macroeconomic scenario, we have pretty much busy calendar today. Most importantly Bank of England (BoE) monetary policy committee is scheduled to make announcement about benchmark interest rate later in London session. Economists are unanimous in view that the committee would keep interest rate unchanged this time around. Then investors will be analyzing minutes from BoE monetary policy meeting.

Another very major release will be about Britain’s unemployment rate (three months figure till November). Economists are expecting some improvement in labor sector. In addition Britain’s Claimant Count Change report for the month of December last year is also due today.

Thus it is advised to abstain from above mentioned trade setup until all these crucial fundamental reports are out because we may see some dramatic surge in GBP/JPY if we see any surprise in macro-economic situation about Britain.

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