The British pound has rallied a bit during the course of the trading session on Wednesday to break above the ¥151.50 level, showing signs of strength again. At this point in time, the market is likely to see quite a bit of noisy behavior, so it will be interesting to see whether or not we can continue to go higher. Quite frankly, this is a market that I think will continue to ask a lot of questions and look towards the potential double bottom underneath as a major support level.
GBP/JPY Video 02.09.21
If we break down below the double bottom, the market could break down quite drastically, perhaps reaching towards the ¥145 level, maybe even down to the ¥140 level. On the other hand, if we turn around a break above the ¥152.50 level, that could send the British pound towards the ¥155 level. All things been equal, this is a market that I think will continue to be very difficult to navigate. If we get a major “risk on” type of event, then it is likely that we will see this pair move right along with it. On the other hand, if we were to see the markets in general selloff, this pair will break down quite drastically as well.
I suspect that the next couple of weeks are going to be very volatile, and therefore I think that you need to be cautious about position sizing, unless of course the market starts to move in your favor, then you can start adding. Because of this, this is a market that is going to continue to be one that you have to be cautious with, but eventually we should get a bit of clarity.
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