Brexit Latest: Deal Fails To Inspire GBP/JPY, GBP/USD Breakouts

Even though GBP/JPY rates are working on a bearish piercing candle on the daily chart, bullish momentum remains in vogue. GBP/JPY rates are above their daily 5-, 8-, 13-, and 21-EMA envelope, which is in bullish sequential order. Daily MACD is rising while above its signal line, while daily Slow Stochastics are pointing higher above their median line. It still holds that traders may want to be on alert for a potential bullish breakout opportunity in GBP/JPY rates – even if that means waiting another week until the holiday trading period ends.

IG CLIENT SENTIMENT INDEX: GBP/JPY RATE FORECAST (DECEMBER 28, 2020) (CHART 2)

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GBP/JPY: Retail trader data shows 45.88% of traders are net-long with the ratio of traders short to long at 1.18 to 1. The number of traders net-long is 1.79% higher than yesterday and unchanged from last week, while the number of traders net-short is 16.96% higher than yesterday and 22.27% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise.

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/JPY-bullish contrarian trading bias.

GBP/USD RATE TECHNICAL ANALYSIS: DAILY CHART (DECEMBER 2019 TO DECEMBER 2020) (CHART 3)

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Like GBP/JPY, GBP/USD rates have not advanced in the wake of the Brexit news. The descending trendline from the November 2007 and July 2014 highs continues to serve as resistance, with the pair failing to return back to the yearly highs carved out in mid-December. As GBP/USD rates funnel into the vertex of the ascending triangle – the combination of price and time suggests that a breakout may soon occur if the pattern interpretation is valid – it still holds that traders want to be on alert for a potential bullish breakout opportunity through 1.3539, which would be another piece of evidence that a long-term bottom has formed in GBP/USD rates.

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