The British pound initially pulled back during the trading session on Friday but then turned around to show signs of life again. The ¥138 level is an area that if the market can clear, we could go back towards the ¥139 level, possibly even the ¥140 level if we get more of a “risk on” type of environment. That being said, what is most interesting here is that we are sitting right at the previous break out, so we have pulled back in order to test that level. The 50 day EMA is starting to rise ever so slightly from the 200 day EMA which is also a sign that perhaps we are trying to go to the upside.
GBP/JPY Video 23.11.20
The target at the upside would probably be the ¥140 level, but I think at that point in time we would run into resistance yet again. I do like the idea of buying short-term pullbacks in this pair, as it seems like the matter what happens, the British pound gets a second lease on life. There seems to be an agreement upon market participants that the most likely outcome of Brexit is that there is some type of deal, and therefore the British pound is looking very cheap from a longer-term standpoint.
If we do break down below the 200 day EMA, which is painted black on the chart, then we could go looking towards the ¥135 level. That is an area that is even more supportive, and therefore I would be very interested in going long at that point in time. Notice how I did not say anything about shorting this market, because quite frankly shorting the British pound has been very difficult.
For a look at all of today’s economic events, check out our economic calendar.