GBP/JPY Price Forecast – British Pound Gives Up Early Gains to Kick Off Year

The British pound initially tried to rally during the day on Monday but then gave back gains as the overextension of the market has become far too obvious. Ultimately, the market needs to pull back a bit if nothing else in order to build up a bit of momentum. Also, you need to keep in mind that some of the action that we may have had in December may have had a little bit to do with anything other than short covering. Regardless, the market looks as if it is trying to figure out where to go next, because quite frankly to go straight up in the air from here seems to be a bit of an extreme move.

GBP/JPY Video 04.01.22

Underneath, I believe that the ¥152.50 level would be an excellent set up, but it would also be a rather extreme pullback. The 50 day EMA sits just above there, so it does make a certain amount of sense there would be a lot of technical support. Regardless, we desperately need to pullback in order to continue to the upside, or perhaps even break down a bit due to the fact that we are overbought. Either way, I do not have any interest in trying to buy this pair, because chasing the trade all the way appear would be a very dangerous thing to do. Take a look at the last time we rallied like this. We reached all the way towards the ¥158 level, and then collapsed. It would not surprise me much to see something like that happen yet again, because this pair is obviously lost at this point in time.

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