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GBP/JPY – Risk reversals drop ahead of Carney speech

GBP/JPY – Risk reversals drop ahead of Carney speech

GBP/JPY remains bid above 151.00 this Thursday morning in Asia, largely on account of the weak tone in the Japanese Yen.

Indecision on charts

Previous day’s Doji candle signals indecision in the market ahead of the Bank of England [BoE] governor Carney’s speech. GBP/JPY could revisit the recent high of 152.86 if Carney repeats that a rate hike may be needed. On the other hand, the cross may drop to 149.75 [September 25 low] if Carney leaves the market less than convinced that rates will be increased before the end of the year.

  • The one-month 25-delta risk reversals fell to -1.413; the lowest level since September 14. The decline indicates increased demand for the downside bets, i.e. Put options.
  • The sentiment is clearly bearish as per the risk reversals. Investors could be hedging against long spot positions, which may come-in handy if Carney kills the rate hike bets.

GBP/JPY Technical Levels

A weak close today would add credence to the previous Doji’s candle and shall signal the rally from 139.30 has topped out at 152.86.

A break below the session low of 150.82 would expose 150.53 [previous day’s low], under which the cross could test 149.75 [Sep 25 low]. On the higher side, a break above 151.54 [Sep 15 high] could yield 152.27 [Sep 25 high] and 152.86 [Sep 21 high].

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