The British pound has taken off to the upside during the trading week, reaching towards the ¥139 level by the time we got to the jobs number in the United States on Friday. Quite frankly, this is a market that is overbought but if we were to break above the ¥140 level, gives us an opportunity to go looking towards the ¥145 level. With that being the case, it is difficult to simply jump in and buy with both hands here, and even if you were very bullish, you would be better served waiting for some type of a pullback in order to find value.
GBP/JPY Video 08.06.20
To the downside, the ¥135 level should be supportive, and I think a lot of buyers would be interested in this market at that area. That is not necessarily my base case scenario, but I recognize that the ¥135 level is the beginning of support all the way down to the ¥129 level. In other words, this is a market that is still very tight and difficult to deal with. The candlestick is very bullish to look at it on its surface, but it is also sitting right at a major breakdown area.
This is an area that previously had been supportive and resistive, so it is not a huge surprise to see that we may struggle in this general vicinity. If you are bullish, and this candlestick could give you reason to be so, you are probably going to be better off waiting for a pullback of a couple hundred pips in order to make the risk/reward ratio favorable.
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This article was originally posted on FX Empire
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