The British pound broke down significantly during the week, slicing through the ¥140 level. At this point, the market is likely to test the ¥139 level, and if it breaks down below there it’s likely that we will continue to see exacerbated losses. At this point, it’s only a matter of time before that happens from what I see, and when that does kick off, we could drop rather precipitously. The market is clearly failing in general, as the Japanese yen is being used as a safety currency.
GBP/JPY Video 02.03.20
The size of this candlestick is of course rather impressive, and it has wiped out quite a bit of constructive action as of late. The coronavirus continues to cause a lot of headline risk out there, and clearly the Japanese yen being used as a safety currency isn’t that big of a surprise. At this point, rallies are to be looked at with suspicion, and as a result it’s very likely that the short-term rallies will end up being selling opportunities, and as a result it’s likely that the pair does eventually break down, but it could be very noisy along the way. Once this pair does break down, it’s likely that it could be looking at a move down to the ¥135 much quicker than anticipated. However, one has to wonder how much more fear there is out there when it comes to the markets in the short term, so a slight bounce really isn’t out of the question at this point in time.