The British pound initially gapped lower against the Japanese yen during the trading session on Monday, but then came back during the week to fill that gap and then fell again from there. That being the case, the market then crashed towards the ¥131 level, where we have seen a significant bounce at this point. Ultimately, I believe that the market is trying to carve out a range between the ¥140 level on the top and the ¥130 level on the bottom. I believe that this pair will be very noisy, but that’s nothing new in this market. The pair is highly sensitive to risk appetite so therefore there will be the occasional noise that causes nothing short of a heart attack for a lot of traders. I believe that part of the bounce on Friday was probably a bit of a short covering rally.
GBP/JPY Video 16.03.20
At this point, now we need to see where risk appetite goes but I can’t imagine that it gets a lot better without some type of good news involving the virus. It looks as if we are trying to price in a recession globally, and that does not bode well for this pair as it does tend to move right along with risk appetite as mentioned previously. I think at this point, the ¥130 level will probably be tested, but we may bounce slightly between now and then before we do that. I continue to look at rallies as something that could be faded, but you may have to drill down to the daily chart in order to do so.