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Christopher Lewis

The British pound initially tried to rally on Thursday, but then broke down a bit to show weakness against the Japanese yen. Previously, I suggested that a breakdown below the neutral candlestick on Monday could give you a “heads up” as to which direction we are going and so far it looks like that might very well be the case but it doesn’t necessarily mean we do it quickly or in an easy fashion. We will probably sawtooth on the way down, and I think we could go as low as the ¥130.50 level. With that, we have a nice set up. However, you’re going to need to deal with a lot of volatility at this point.

GBP/JPY Video 03.04.20

You look at this chart, it looks very similar to the GBP/USD pair, which looks like the 1.35 level is doing the same thing over there. At this point, it looks very much like the risk appetite is starting to fall off, and that of course is very negative for this currency pair. If we did somehow turn around a break above the ¥135 level, then we will probably look towards the ¥137 level to the upside. That seems to be very unlikely this point, so therefore I am more apt to short small rallies that show the first signs of exhaustion.

Ultimately, it seems as if it is a scramble for safety at this point, and that of course is very negative for the pair. The Japanese yen being one of the ultimate safety currency is will work in its favor, so pay attention, you should have plenty of shorting opportunities as we bounce around.

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