The rates continue within the downtrend in favor of the JPY. However, we observe the month-long loss of intensity of the trend and trading in the range 126.830-130.525 JPY. At the same time, given the large number of negative factors, there is every reason to expect a resumption of the trend, but not a reversal.
This week, the pound strengthened against major currencies due to increased opposition to Boris Johnson's plans. The British Prime Minister is losing support even among his party. Today, there will be a vote on a bill that will block Brexit without a deal. Nevertheless, in the medium term, the pound will remain under pressure due to the worsening political crisis, the economic downturn in the EU, and the economic situation in the UK. In particular, the data published yesterday on the index of business activity in the construction sector shows a significant deterioration of the situation, falling to 45 pips in August. The PMI index in the services sector is also declining, although it remains in the area of 50+.
The yen, in turn, can always count on support as a safe asset, which is happening these days, even despite the recent macroeconomic reports on the Japanese economy, which were generally negative. Investors are still avoiding risks due to the uncertain situation around the trade conflict between China and the US.
We suppose that volatility will increase in the near future under the influence of the political situation in Britain and the likely blocking of Britain's exit from the EU without a deal. This can cause a wave of optimism. The resistance line of the flat trend (130.525) can be tested. However, after that, the pound could still continue decreasing, given the perspectives for new elections and the continuing uncertainty with Brexit. On the other hand, the trade conflict between China and the United States may contribute to the strengthening of the JPY. In this situation, in the short term, the deals to BUY can be effective, but in the near future, the deals to SELL can again be the most effective, as confirmed by the Stochastic oscillator. Entry points can be specified at the levels of 126.830 and 130.525 JPY.
