Forex traders will get key UK data this morning which will include monthly GDP data for July, expected to show a small increase to finish the second-quarter. Industrial and manufacturing data is anticipated to come in flat for July, countered by small monthly gains in construction output and in the powerful service sector. Rounding up the range of economic data will be the trade balance for July which is favored to show a rise in deficits with the exception for the visible trade balance. How will the GBPJPY react after the release of today’s UK data? Can the rally extend with a breakout or is a reversal on the horizon? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month in profits.
Japanese data released during the Asian trading session showed a smaller than expected current account surplus and a bigger than expected trade deficit for July. Bank lending also slowed down and the final reading on second-quarter GDP was revised lower amid a sharp downward revision in business spending which was slashed to just 0.2% quarterly from the previously announced rise of 1.5% quarterly. The Japanese Yen was able to advance against the British Pound despite the data as Brexit turmoil is on the rise and safe-haven bids for the Japanese Yen are increasing as well. Will the GBPJPY rally over coming trading sessions? Today’s fundamental analysis will cover the downside potential as well as the upside risk for this currency pair.
Here are the key factors to keep in mind today for British Pound trades:
- UK GDP: The UK GDP for July is predicted to increase by 0.1% monthly and to decrease by 0.1% for the three-month-over-three-month period ending in July. Forex traders can compare this to the UK GDP for June which was reported flat at 0.0% monthly and which decreased by 0.2% for the three-month-over-three-month period ending in June.
- UK Industrial Production and UK Manufacturing Production: UK Industrial Production for July is predicted flat at 0.0% monthly and to decrease by 1.0% annualized. Forex traders can compare this to UK Industrial Production for June which decreased by 0.1% monthly and by 0.6% annualized. UK Manufacturing Production for July is predicted flat at 0.0% monthly and to decrease by 1.0% annualized. Forex traders can compare this to UK Manufacturing Production for June which decreased by 0.2% monthly and by 1.4% annualized.
- UK Construction Output Seasonally Adjusted: UK Construction Output Seasonally Adjusted for July is predicted to increase by 0.2% monthly and by 0.1% annualized. Forex traders can compare this to UK Construction Output Seasonally Adjusted for June which decreased by 0.7% monthly and by 0.2% annualized.
- UK Index of Services: The UK Index of Services for July is predicted to increase by 0.1% monthly and by 0.2% for the three-month-over-three-month period ending in July. Forex traders can compare this to the UK Index of Services for June which was reported flat at 0.0% monthly and which increased by 0.1% for the three-month-over-three-month period ending in June.
- UK Trade Balance: The UK Visible Trade Balance for July is predicted at -£9.800B. Forex traders can compare this to the UK Visible Trade Balance for June which was reported at -£7.009B. The UK Trade Balance Non EU for July is predicted at -£3.000B. Forex traders can compare this to the UK Trade Balance Non EU for June which was reported at -£0.186B. The UK Total Trade Balance for July is predicted at -£1.000B. Forex traders can compare this to the UK Total Trade Balance for June which was reported at -£1.779B.
Here are the key factors to keep in mind today for Japanese Yen trades:
- Japanese Current Account Balance and Trade Balance: The Preliminary Japanese Current Account Balance for July was reported at ¥1,999.9B. Economists predicted a figure of ¥2,046.0B. Forex traders can compare this to the Japanese Current Account Balance for June which was reported at ¥1,211.2B. The Preliminary Japanese Adjusted Current Account Balance for July was reported at ¥1,647.1B. Economists predicted a figure of ¥1,700.6B. Forex traders can compare this to the Japanese Adjusted Current Account Balance for June which was reported at ¥1,941.9B. The Preliminary Japanese Trade Balance for July was reported at -¥74.5B. Economists predicted a figure of -¥24.0B. Forex traders can compare this to the Japanese Trade Balance for June which was reported at ¥759.3B.
- Japanese GDP: The Final Japanese GDP for the second-quarter increased by 0.3% quarterly and by 1.3% annualized. Economists predicted an increase of 0.3% quarterly and of 1.3% annualized. Forex traders can compare this to the previous Japanese GDP for the second-quarter which increased by 0.4% quarterly and by 1.8% annualized. The Final Nominal GDP for the second-quarter increased by 0.3% quarterly. Economists predicted an increase of 0.3% quarterly. Forex traders can compare this to the previous Nominal GDP for the second-quarter which increased by 0.4% quarterly. The Final GDP Deflator for the second-quarter increased by 0.4% annualized. Economists predicted an increase of 0.4% annualized. Forex traders can compare this to the previous GDP Deflator for the second-quarter which increased by 0.4% annualized. Final Private Consumption for the second-quarter increased by 0.6% quarterly and Final Business Spending increased by 0.2% quarterly. Economists predicted an increase of 0.6% quarterly and of 0.7% quarterly. Forex traders can compare this to previous Private Consumption for the second-quarter which increased by 0.6% quarterly and to previous Business Spending for the second-quarter which increased by 1.5% quarterly.
- Japanese Bank Lending: Japanese Bank Lending including Trusts for August increased by 2.2% annualized and Japanese Bank Lending excluding Trusts increased by 2.1% annualized. Forex traders can compare this to Japanese Bank Lending including Trusts for July which increased by 2.4% annualized and to Japanese Bank Lending excluding Trusts which increased by 2.3% annualized.
- Japanese Eco Watchers Survey: The Japanese Eco Watchers Survey Current Index for August was reported at 42.8 and the Japanese Eco Watchers Survey Outlook Index was reported at 43.5. Economists predicted a figure of 41.3 and of 45.2. Forex traders can compare this to the Japanese Eco Watchers Survey Current Index for July which was reported at 41.2 and to the Japanese Eco Watchers Survey Outlook Index which was reported at 44.3.
Should price action for the GBPJPY remain inside the or breakdown below the 130.400 to 131.400 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 131.000
- Take Profit Zone: 126.550 – 127.450
- Stop Loss Level: 132.150
Should price action for the GBPJPY breakout above 131.400 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 132.150
- Take Profit Zone: 133.850 – 135.150
- Stop Loss Level: 131.400
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