The British pound has rallied against the Japanese yen initially during the trading session on Wednesday but found enough resistance near the 133.50 level to turn around and pull back a bit. By doing so, the market looks as if it is going to be sluggish to the upside and quite frankly it should be, as this is a very risk sensitive currency pair. Beyond that, the British pound has to worry about not only the negotiations between the United Kingdom and the European Union, but also the complete lockdown of the country. This certainly will have a massive influence on economic growth.
GBP/JPY Video 26.03.20
Rallies at this point in anything risk related are certainly going to be skittish at best, so it’s not a huge surprise to see that we have given back half of the gains by the time New York stepped up. If we do break out above the ¥133.50 level, then it’s possible that we could see this market reaching towards the ¥136.50 level where there has been a significant amount of action recently. For what it’s worth, there is also the so-called “death cross” going on, but quite frankly that tends to be an indicator that we are closer to the bottom than starting some type of massive selloff. All things being equal, I believe that fading rallies probably still works out best at this point, but I do not want to just jump in with both feet. Remember, some of these “risk on rallies” can be brutal when we are in bearish markets overall.