The British pound has rallied a bit during the course of the trading session on Friday, after forming a hammer on both Wednesday and Thursday. That being said, there is still a significant amount of resistance above, and that is something that could come into the picture. The ¥152.50 level above is the beginning of significant resistance that extends to the ¥153 level. That is an area that I think will be very difficult to get above, but if we do finally break above there then it would be a major turn of events in this pair, opening up a continuation of the longer-term uptrend.
GBP/JPY Video 20.09.21
On the other hand, if we turned around to break through those hammers, that would be a very negative turn of events to open up the possibility of a move down to the ¥150 level. The ¥150 level is a large, round, psychologically significant figure, as well as the beginning of 100 points worth of support. If we were to break down below the ¥149 level, then I believe that the market unwinds drastically at that point, in a major “risk off” type of event, having people rush into the Japanese yen as it is considered to be a safety currency. At that point, the market is likely to go all the way down to the ¥145 level, maybe even the ¥140 level.
One thing is for sure, this market is going to continue to be very choppy and noisy, so you need to be very cautious with your position size, as it is a market that does tend to move quite rapidly. I will be putting small positions on and then adding as things work out.
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