The British pound fell fairly significantly against the Japanese yen during trading on Friday but found enough support just above the 50 day EMA to turn around and form a bit of a hammer. By doing so, the market is showing that there is a lot of support at the 50 day EMA, but it also looks as if there may be resistance at the 200 day EMA. Because of this, I anticipate that the market has nowhere to go, at least not in the short term. However, if we can break above or below one of these moving averages, that gives us the possibility of placing a trade with a bit more confidence.
GBP/JPY Video 13.07.20
Breaking below the 50 day EMA opens up a move down to the ¥132 level, just as breaking above the 200 day EMA would open up a potential move towards the ¥140 level. With the way this pair has been acting, I do believe that it is probably a much easier trade to the upside, as we have made a series of “higher lows.” The British pound has been rather healthy against most currencies, so it is not just this currency pair.
Because of this, I would be much quicker to take that breakout to the upside and might even position size it a little bit bigger than to the downside. If we were to somehow break down below the ¥132 level after that initial breakdown, then we could be talking about a bigger move for a longer amount of time. However, that would need some type of negativity entering the risk appetite of traders.
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