The British pound has broken down significantly during the course of the trading session on Monday as it was a “risk off” type of scenario. Ultimately, this is a market that looks as if it is trying to press lower to break through a significant support. The ¥150 level extends support all the way down to the ¥149 level, and if we break down below there then it really starts to break down quite drastically.
GBP/JPY Video 21.09.21
The size of the candlestick certainly suggests that we have quite a bit of negativity here, and therefore I think it is probably only a matter of time before we break through the bottom. If we do, that is a sign that we are going to go much lower, as it could very well open up a move down to the ¥145 level, maybe even the ¥140 level over the longer term.
On the other hand, if we took out the candlestick from the Monday session to the upside, that could be a very bullish sign. Nonetheless, I think the one thing you can probably count on is a lot of noisy behavior, so I think that if we rally from here, it is very likely that it is time to start fading short-term rallies that show signs of exhaustion. Keep in mind that the Japanese yen is considered to be a safety currency, and therefore you need to pay close attention to risk appetite in general. As the Americans are starting to lift risk appetite higher, I suspect that this will be more or less a “fade the rallies” type of market.
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This article was originally posted on FX Empire
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