The British pound has pulled back against the Japanese yen during the Monday session as perhaps we have gotten far too ahead of ourselves. That being said, it does make a certain amount of sense that we see this pullback towards the ¥155 level, but whether or not we can reach all the way down there might be a different question. All things being equal, this is a market that I think will find plenty of buyers on dips, but if we were to give back that ¥155 level, it could change some things. At that point, I think you may see a return to what we had just a few months ago.
GBP/JPY Video 11.01.22
The big question now is whether or not this market can continue to break out, or are we simply in a major consolidation area? I think at this point in time it is probably still a bit early to suggest one or the other, but clearly you cannot be shorted this market anytime soon. Keep in mind that the pair does have a high correlation to risk appetite, so we need to keep in mind that you probably need to pay attention to multiple other markets at the same time.
The ¥158.50 level above seems to be the absolute ceiling in the market, but if we were to break above there then it would obviously become even more parabolic, something that I would not like to see simply due to the fact that the higher a market gets in a short amount of time, the more violent the pullback tends to be.
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