The British pound has gone back and forth during the trading session again on Thursday against the Japanese yen as we continue the same consolidation that we have been in for two weeks. This is not a huge surprise, considering just how parabolic the market had been, so the question now becomes whether or not we are simply consolidating before making a bigger move higher, or are we in a “distribution phase?”
GBP/JPY Video 14.01.22
If we are in a distribution phase, a break down below the ¥155 level would certainly confirm that, and we would probably see a repeat of the last time we went parabolic, meaning that we could drop all the way down to the ¥150 level. Keep in mind that this pair is highly sensitive to risk appetite, so that comes into the picture as well. By watching other markets, you can get a feel for whether or not this market should be going higher or lower.
Alternately, if we can break above the ¥158.50 level, that clears all resistance and sends this market much higher and probably more of a parabolic “buy-and-hold” situation where we go looking towards the ¥160 level rather quickly. I do not necessarily like that move, at least not without working off quite a bit of the froth that we have seen over the last couple of weeks. Quite frankly, I even like the idea of buying a pullback closer to the ¥155 level, because that is my “line in the sand” when it comes to this pair. All things being equal, you will have to be cautious over the next couple of sessions.
For a look at all of today’s economic events, check out our economic calendar.