Subsequent to a Trump win, I had elaborated on Sunday that I was taking a long position on the GBP/JPY. My reasons for doing so were partially in reaction to the election result - the fact that a potential US-UK trade deal could be in the works means that the economic consequences of Brexit may not be as serious as had been anticipated.
From a technical standpoint, I went long on this currency pair since the GBP had seen very significant drops in the months before and after Brexit, thus leading to the strong possibility that the currency now has a lot of upside should sentiment continue to reverse.
So far, my expectations have been confirmed. The GBP/JPY currency pair is up by nearly 2 percent since my position was initiated, and it is certainly possible that the currency could reach a target of 141.
In this light, what can we expect this coming week? So far, while the pound has been on an upward course, we have seen some consolidation against the dollar. This is not entirely unexpected in the context of 141 being a longer-term target.
While jobless claims in the UK are expected to climb for the third month in a row in October, household earnings are concurrently set to climb by 2.4 percent - which marks the highest rate of growth since September 2015. Therefore, I expect that such news will continue to provide a boost for the pound, along with retail sales in Britain rising at their fastest pace in 14 years.
On the Japanese side, while Japan's economy has been growing faster than expected, a stronger dollar will likely see the yen fall while exports in Japan continue to rise. The reason for this is that while Japan has run out of room to lower rates, monetary policy tightening by the Federal Reserve will likely lead to a drop in demand for the yen and a flight towards the dollar instead. In this regard, I expect anticipation of such an outcome will continue to place downward pressure on the yen.
To conclude, I am still confident in the prospects of a rising GBP/JPY - I remain long and expect the 141 level to be reached.
Disclosure: I am/we are long GBP/JPY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.