GBPJPY. Open longs on downward turns: the pound temporarily lost ground

Before the pound had time to celebrate the latest opinion polls in favor of the Conservatives, fresh sociology entered the market, which outlined pessimistic prospects for the Tories. A Kantar poll found that Labour began to gain momentum, while Boris Johnson's party lost a few percentage points from previous studies. The closer to the election (which will be held on December 12), the British currency is more sensitive to such news.

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Therefore, it is not surprising that the pound fell across the market today - including the dollar and the yen. The GBP/USD pair is under additional pressure from the external fundamental background: the latest news regarding the prospects for the US-Chinese dialogue has supported the greenback. If the likelihood of signing a deal (its first phase) grows, the dollar will continue to strengthen, exerting a corresponding effect on all dollar pairs. But with the GBP/JPY cross pair, the situation is somewhat different. Reducing external risks is not on the side of the pair's bears due to a corresponding decrease in demand for the yen.

As you know, the Japanese currency is a safe-haven currency, so the decline in anti-risk sentiment has weakened the yen's position in a basket of major currencies - for example, the USD/JPY pair tested the 109th figure again today. In other words, the yen now does not have "its own resources" for independent growth, and also when paired with the pound, the currency follows the British events. This state of affairs distinguishes the GBP/JPY cross from the GBP/USD pair, where the dollar can play an independent game, even despite the unconditional priority of the Brexit theme. In turn, the yen is virtually helpless in relatively calm periods of time - especially against the backdrop of recent statements by the chairman of the Bank of Japan.

All this suggests that the British currency rules today in the GBP/USD cross-pair . The price chart (especially on the four-hour timeframe) has a wave-like character: optimism is replaced by pessimism and vice versa. Since mid-October, the pair has been fluctuating in the 200-point range of 139.30-141.30 - only occasionally and briefly beyond the boundaries of the price range. And now the cross is in the downward movement, heading for the 139th figure.

Meanwhile, the pair probably will not overcome the lower limit of the above price range. Moreover, tomorrow the situation may change dramatically, as the research agency YouGov will unveil new survey results. We can expect another upward impulse for the pound if it is in favor of the Conservatives, and the GBP/JPY pair will not be an exception here.

Let me remind you that sociological studies of other agencies speak of the successes of Conservatives. For example, yesterday's surge in optimism for the pound was based on a survey conducted by Opinium commissioned by The Observer. The published figures demonstrate the success of the Johnson party: almost half of the respondents (47%) are ready to vote for the Conservatives, while the Labour Party is still content with relatively modest support (28%). Liberal Democrats, according to Opinium, are also losing ground - they are supported by only 12% of respondents.

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In other words, at the moment it is impossible to talk about any trend that would indicate a decrease in the rating of Conservatives. In addition, the British electoral system does not allow identifying party ratings with possible political developments in a future Parliament. For the formation of the majority, Conservatives need not only to win in their constituencies, but also to win victory in those areas where the positions of Labour are traditionally strong. Vice versa - even if the rating of the Laborites will continue to grow, this does not mean at all that they will be able to take the House of Commons, that is, to form a majority there. By the way, if Johnson cannot form a majority, there are several possible scenarios for further events (Corbyn's premiership or Labour's participation in the government, Conservative alliance with smaller parties, etc.). But in order to consider these or those options, real figures of the election results are necessary, and not the expected result. Therefore, the intrigue in this matter will continue until December 12, and the pound will continue to respond to opinion polls.

Thus, traders should not trust the current downward momentum of the GBP/JPY pair. One needs only to look at a four-hour or daily chart (starting from mid-October) to assess the variability of the cross. On the other hand, the pair did not go beyond the above price range during this period of time. All this allows us to consider long positions when approaching the support level of 139.30 (the lower line of the Bollinger Bands indicator on the daily chart). The target of the upward pullback is 140.45 (the upper boundary of the Kumo cloud on the same timeframe). If the data from YouGov will pleasantly surprise investors (for example, with a significant jump for Conservatives), then the cross can go up to the upper boundary of the price band, that is, at around 141.30.

The material has been provided by InstaForex Company - www.instaforex.com