The British pound initially rallied against the Japanese yen during the trading session on Wednesday but gave back the gains to show signs of weakness again. At this point, the 200 day EMA looks as if it is offering a bit of pressure to the market in both directions. Having said that, if the market does break down below the Tuesday lows, it’s very likely that we continue to slide lower. Keep in mind that this pair is highly sensitive to risk appetite and that of course has been all over the place. I anticipate more volatility and as a general rule volatility means pain.
GBP/JPY Video 05.03.20
To the downside I would anticipate that the ¥135 level could be targeted as it is not only a large, round, psychologically important figure but it is also where the 61.8% Fibonacci currently resides. At that point, you may get a bit of a bounce, but I think it’s a matter of waiting to see what happens on a daily close. Rallies still aren’t completely trusted and therefore it makes sense that exhaustion comes in and takes its toll on these moves, especially on shorter time frames. In volatile markets like we have seen, it’s difficult to hang on to bigger moves, so keep in mind that drilling down to titer time frames may make some sense but keep an eye on the fact that the daily chart does look awfully weak suggests that the downside is probably the easier trade in general.