The British pound fell again against the Japanese yen during trading on Wednesday, as we continue to worry about the Federal Reserve, global trade, and of course the Sino-American trade relations which although they have settled a bit, are still far from being settled. There are still a lot of concerns when it comes to whether or not the Americans and the Chinese can get it together, so it makes sense that we could see more volatility to the downside. I believe that the ¥140 level underneath is massive support though, so a break down below that level should send this market much lower.
GBP/JPY Video 20.12.18
The alternate scenario is that we get more of a “risk on” move, which could send this market towards the ¥145 level. However, I think that’s probably about as far as we can go to the upside, so I do prefer to fade rallies, at the first signs of exhaustion as we are most decidedly in a downtrend, and of course we have to worry about the most crucial thing when it comes to the British pound: the Brexit negotiations.
If we do break down below the ¥140 level, this market probably unwinds to the ¥138 level, but I don’t know that we can get down there between now and New Year’s Day. If we do, that will just be more of a bear market that will probably coincide with the British pound collapsing everywhere. That certainly is a possibility, but we need another headline to make that happen.