The British pound has rallied significantly against the Japanese yen during the trading session on Monday, reaching towards the ¥131 level. The market broke down on Friday, and now it is testing whether or not that breakdown with legitimate. Quite frankly, with all of the “fear of missing out” that we are seeing in the United States, it is hard to tell. Having said that, we are still most certainly in a downtrend, so I like fading signs of exhaustion. We do not have it yet, but you may look to short-term charts in order to start scaling into the downside. After all, this is a risk sensitive pair, and clearly risk appetite, although extraordinarily strong to kick off the week, is struggling in general.
GBP/JPY Video 19.05.20
Furthermore, the British economy has a lot of issues surrounding it, not the least of which is going to be Brexit issues, and then of course the fact that the coronavirus numbers in the United Kingdom have been much worse than most other countries. With that, I believe that the British pound will roll over eventually, but in the short term it looks like it still has enough resiliency to keep trying to grind to the upside. I will wait for a bearish or exhaustive daily candlestick to place a trade, because this pair is extraordinarily sensitive to risk appetite and “FOMO”, something that is a real problem and bear markets when you get the occasional bounce. That being said, the market is most decidedly going from the upper left to the lower right, and that is the most important thing to worry about.
This article was originally posted on FX Empire