The British pound has initially tried to rally a bit during the trading session on Monday, but then pulled back from the near highs to turn around and show signs of weakness. At this point in time, the market could very well go looking towards the 200 day EMA, which is near the ¥136.50 level. Overall, even if we are in a major uptrend, this is a scenario where the market participants could start to take profits or even try to short this pair, as the market is likely to see a little bit of gravity come into play.
GBP/JPY Video 09.06.20
Underneath there, the ¥135 level could be an area where buyers might get involved as well, as it is a large, round, psychologically significant figure. Furthermore, it is an area that had previously been resistance so it would make sense that it could be support. In other words, there are several areas underneath that could come into play.
The alternate scenario is that the market simply shoots through the ¥140 level, which could open up the possibility of a move towards the ¥144 level. That obviously would be a very “risk on” type of move, but at this point it just seems like we are overdone so I think it is only a matter of time before people would be overly cautious in that explosive move. Furthermore, if we break the ¥140 barrier, it will look a whole lot like a “blow off top.” That of course is a negative turn of events.
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This article was originally posted on FX Empire
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