The British pound has rallied a bit during the trading session on Wednesday to reach towards the ¥142 level again. This is an area that caused resistance previously, so it should not be a huge surprise to see that we have pulled back. At this point, I think the market pulling back is simply trying to build up enough pressure to continue going higher. After all, you cannot have a scenario where you go straight up in the air forever.
Furthermore, it is obvious that this area has been important in the past, so building up a little bit of momentum makes quite a bit of sense. I like the idea of buying a pullback over the next couple of days, as it is obvious that this area should continue to cause a bit of problems. However, once we get beyond that, the British pound will be free to go towards the ¥145 level.
GBP/JPY Video 14.01.21
I have no interest in shorting this market, because even if the ¥140 level did not offer support underneath, which I believe it will, the 50 day EMA is approaching that area rather rapidly, and I think it is only a matter of time before buyers would step back into the market in that general vicinity. After all, this is a market that has seen a lot of upward pressure in a very short amount of time, and therefore it is very likely that what we see is a simple rebuilding of the overall momentum to get involved. I have no interest in selling this pair and believe that it continues right along with the “risk on trade.”
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