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Christopher Lewis
GBP/JPY

The British pound has rallied significantly during the trading session on Wednesday, reaching towards the 200 day EMA during the day, as both Europeans and Asians bought into this pair. However, the 200 day EMA also has a gap from back in February that could cause some issues as well. In other words, this is setting up for a pullback at the least and quite frankly I think that would be welcome news by the bullish traders out there as well. After all, a market cannot go straight up in the air forever. The higher this market goes in this direct shot to the upside, the more likely the breakdown is going to be absolutely brutal.

GBP/JPY Video 04.06.20

If that is the case, the breakdown could be rather quick. In the short term, I believe that it is healthy for the market to go down to the ¥135 level, an area that had been previous resistance. The Japanese yen has been absolutely clobbered as of late so that has exacerbated this pair more than anything else. Overall, I believe that this is a market that continues to see a lot of volatility, and quite frankly the higher this pair goes, the uglier the return to the bottom is going to be. If we do break out to the upside and somehow managed to clear the ¥139 level, which is the top of a cluster, then the market will probably go looking towards the ¥142 level. That seems to be very unlikely at this point though, again as the market needs to pullback more than anything else.

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

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