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Christopher Lewis
GBP/JPY

The British pound rallied against the Japanese yen during trading on Tuesday, breaking above the top of a hammer from the previous session. This is a classic bullish signal, but there is significant resistance above near the ¥142.50 level. I think at this point we will probably have to go back and forth in the short term to build up the necessary momentum, because quite frankly there are a lot of questions when it comes to the UK economy. Do not get me wrong, I am not saying that we should short this market, just that consolidation between the ¥140 level and the ¥142.50 level makes quite a bit of sense.

GBP/JPY Video 20.01.21

If we can break above the ¥142.50 level, then the market is likely to go looking towards the ¥145 level. That is an area that will attract a lot of attention due to previous action in the fact that it is a large, round, psychologically significant figure. Looking back at the support at the ¥140 level, we also have the 50 day EMA coming into the picture so it does make sense that perhaps we would see a little bit of support in that area and go looking towards buying essentially what would be “cheap British pounds.”

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Keep in mind that this pair is highly sensitive to risk appetite so it is certainly something that you should pay attention to. If stock markets and other risk assets in general start falling, you will probably have to pay close attention to this pair. However, they will take off to the upside that should continue to add bullish pressure here.

For a look at all of today’s economic events, check out our economic calendar.

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