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Christopher Lewis
GBP/JPY daily chart, October 18, 2019

After the EU and the UK had announced there was an agreement, members of Parliament already started to talk about how there were significant gaps in what they ask for. That being the case, it’s likely that we will continue to see the British pound pulled back a bit, as it has been a bit over exuberant anyway. With that being the case, the 61.8% Fibonacci retracement level makes quite a bit of sense as an area that would cause resistance. Not only is at the 61.8% Fibonacci retracement level, but it is also the ¥140 level which of course is a large, round, psychologically significant figure. In other words, this is exactly where you would expect trouble.

GBP/JPY  Video 18.10.19

At this point in time, dips will probably be thought of as value but those dips could be 200 pips or more. Because of this, being prudent and waiting for some type of stability after a pullback makes quite a bit of sense. Remember, it was just a handful of days ago that the market was trading 1000 pips below. It’s almost impossible to jump in now, because quite frankly you are simply chasing the trade. That being said, I’m looking for a pullback to the black 200 day EMA at the very least, perhaps even ¥135 before buying in a larger “buy-and-hold” scenario. The fact that the previous candle stick is a hammer also solidifies the fact that we are going to struggle in this general vicinity.

Please let us know what you think in the comments below

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