A positive Brexit outcome will lead to an upwards acceleration in GBPJPY, according to David Sneddon and his team at Credit Suisse in London.
Sneddon says GBPJPY has been grinding higher over the last couple of months, with the market now taking a short breather at the potential downtrend from 2019, currently at 140.68/71 (see Chart). Once this short-term consolidation is complete, and assuming a Brexit deal is done, he expects the currency pair to go higher in line with the bullish outlook on GBPUSD he has had in place since late September.
Above 140.68/71 would open up pivotal resistance at the 142.72/43.24 September high and the 2018 downtrend. Sneddon thinks a clear and sustained break above this resistance level would raise the risk of a large basing structure, which would lead to an acceleration of upside momentum, with resistance then seen at the cluster of price highs and confirmed downtrend from September 2018 at 146.61 and stretching up to 149.72, which roughly coincides with GBPUSD reaching Sneddon’s first upside objective at 1.4300. However, an eventual break for GBPJPY above 149.72 would complete a large basing structure, opening up 156.61 over the longer term (which would also tally with completion of a large basing structure in GBPUSD and a target of 1.49/51).
Sneddon sees key short term support at 137.46/20, which includes the 55-day average, which he thinks will hold to keep the risks higher. A move below this level would open up the 134.41 and 133.05 lows, below which would threaten a major top, most likely on a “no-deal” outcome, which is not Sneddon’s base case.