The British pound has rallied a bit during the week, reaching towards the 200 week EMA. By peeking above it shows that there is a certain amount of strength, but ultimately, I do think that there is a lot of work to do before taking off to the upside. Underneath, the 50 week EMA is crossing the ¥140 level, and therefore should offer a significant amount of support. All things being equal I think that it is only a matter of time before we rally a bit and go looking towards the highs again at the ¥145 level. Keep in mind that this pair is highly sensitive to risk appetite, so that has to be paid attention to as well.
GBP/JPY Video 17.02.20
If we start to see the situation in China improve, that should push money away from the Japanese yen. That being said, it’s important to notice that the British pound has been relatively strong through all of this, and therefore the fact that it is rising against the pound should be a huge surprise. After all, it has even kept up with the US dollar, so that’s a good sign as well. With this, I like buying dips but I also recognize that this pair is extraordinarily volatile so you should keep that in mind. Build up a position rather slowly and take advantage of what should be a nice basing pattern. A break above the ¥145 level should accelerate the buying pressure towards the ¥148 level. I have no interest in shorting this pair, unless of course we close below the ¥139 level on a daily chart.
Please let us know what you think in the comments below