GBP/JPY Price Forecast – British pound continues to base

The British pound went back and forth during the trading session on Friday, as we continue to try to figure out what to do next. The ¥135 level underneath is a large, round, psychologically significant figure, and will attract a lot of attention. That being said, rallies at this point still have to be looked at with suspicion, because the risk appetite around the world is of course cracking.

GBP/JPY  Video 15.07.19

We did form a bit of a hammer during the trading session on Thursday, but also an inverted hammer during the trading session on Wednesday. Because of this, a break above the couple of candlesticks would be very bullish, perhaps sending the market to the ¥137.50 level. Signs of exhaustion in that area should be a nice selling opportunity as it not only is structural resistance, but it is also where the 50 day EMA is.

Alternately, a break down below the ¥135 level not only breaks to a large, round, psychologically significant figure, but it also shows the market busting through the hammer on Thursday. By doing so it opens up the door to wipe out the overall uptrend. We are below the 61.8% Fibonacci retracement level, and now could go down to the 100% Fibonacci retracement level which of course is down at the ¥131.50 level. Although not scientific, my experience has told me that typically when you break down below the 61.8% Fibonacci retracement level, you tend to wipe out the entire move, thereby leading the market lower from a sentiment standpoint.

Please let us know what you think in the comments below