The British pound fell significantly during the week, reaching below the ¥142 level. Having said that, there is a certain amount of support underneath and therefore turned around to form a bit of a hammer. The hammer of course is a bullish sign, and it was preceded by a hammer for the previous week. However, the shooting star from the previous two weeks will also offer resistance as well. The market is currently trading around the 200 week EMA, and the fact that we have two shooting stars followed by two hammers tells me that this is a market that’s probably going to continue to go back and forth on short-term charts.
GBP/JPY Video 10.02.20
The ¥140 level underneath should be thought of as a major support level and a bit of a short-term “floor” in the market, but at this point I think you are probably better off staying away from the longer-term charts and simply trading some type of range on short-term charts. I do believe that the market will eventually make some type of longer-term move, but there looks as if there is a lot of indecision when it comes to the British pound due to the Brexit negotiations, and of course the issues with the risk appetite when it comes to the coronavirus ripping through Asia. Ultimately, there are plenty of reasons to keep this market going back and forth and volatile so therefore longer-term traders will probably struggle a bit. All things being equal though, I do think the buyers will return.
Please let us know what you think in the comments below