• Market fears a second lockdown in the UK
  • New round of Brexit trade talks
  • Potential Double Top setup in GBP/JPY (H1)

Earlier this month, UK Prime Minister Boris Johnson took the British pound on a bungee plunge after his government published the Internal Market Bill. (Check out this article to learn how the Internal Market Bill affects the British pound) As a result, GBP/JPY (codename The Dragon) broke several key price levels from 141 to 136 and recently further down to the 133 level in fear of a no-deal Brexit scenario and a second COVID-19 lockdown in the UK.

After a period of recrimination from both parties, the EU and UK agreed last Wednesday that they are determined to accomplish a trade deal, sending a sign of relief to the market, allowing GBP/JPY to recover part of its losses. At the moment, GBP/JPY is making its second attempt trying to break above the price level of 136 after failing yesterday. Failing to break above the level for a second time may lead to the formation of a Double Top pattern.

Double Top Setup for GBP/JPY (H1)
Top level at 136.000
Neckline at 135.3
Sell Stop Order at 135.20

Potential Price Movers
Brexit trade talks: A new round of Brexit trade talks will be carried out this week. Any sign of the possibility of a no-deal Brexit may lead to the weakening of GBP.

COVID-19 situation in the UK: With the recent resurgence in the number of COVID-19 cases, everyone is afraid that Prime Minister Johnson may carry out a second lockdown, which will directly impact the UK economy negatively, leading to the weakening of GBP.

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By Gim Hong Lee

Gim Hong has been a full-time currency trader for more than 2.5 years, focusing on day and swing trading of major currencies and their crosses. He is a frequent contributor of currency and economic analysis in Forex Trading Asia. Graduated from Columbia University in the City of New York with a bachelor’s degree in applied mathematics and statistics, the nerdy side of Gim Hong enjoys learning about data analysis, machine learning and their applications in currency trading.

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