The British pound gapped lower against the Japanese yen during the open on Monday, and then went back and forth rather violently. All things being equal, the ¥135 level should offer plenty of resistance, as it is a large, round, psychologically significant figure, and of course the scene of the 38.2% Fibonacci retracement level. The area also had seen a lot of selling pressure previously, and the fact that the market is so overextended makes quite a bit of sense for a pullback. The pullback could go down to the 50 day EMA which is red, near the ¥132 level.
GBP/JPY Video 17.09.19
Looking at this chart, if we were to break above the ¥136 level, then we probably go towards the 200 day EMA. The 200 day EMA is going to offer a significant amount of resistance, so if we show signs of exhaustion there, then the market could break down rather significantly as it is also the 50% Fibonacci retracement level. Either way, this is a market that has gotten over extended and gone parabolic, so having said that we need to get a bit of a pullback anyway. Ultimately, with everything that’s going on in Saudi Arabia and the entirety of the concerns about global growth makes quite a bit of sense that we see a pullback here and a rush towards the Japanese yen given enough time. All things being equal, I believe that this market is going to be sold given enough time, but we are obviously going to have a lot of volatility going forward.
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This article was originally posted on FX Empire
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