The British pound has fallen apart during the week, as the risk appetite of traders around the world has been cratered. As we have broken through the ¥130 level, it’s very likely that the market will continue to see selling pressure on rallies, as the Brexit continues to cause a lot of issues. After all, the Brexit is going poorly, and there is no real reason to think that it’s going to change. The British and the Europeans are nowhere near coming to some type of compromise.
GBP/JPY Video 05.08.19
All things being equal, it’s not until we break above the ¥135 level that I would be impressed from a longer-term standpoint, and I think we are much more likely to see the ¥125 level hit than anything else. The ¥125 level will of course cause a lot of attention, but if we break down below there then things really go south from there. All things being equal, the British pound is a very negative currency right now, and as the Japanese yen is a safety currency, it makes sense this is a bit of a “perfect set up.”
Ultimately, the bearish pressure is only accelerating, even though we are at extremely low levels. Short-term charts will probably be used to fine-tune interest, but they should all be to the downside at this point. Expect a significant bounce at the ¥125 level, but I believe that will only be sold into as well. It isn’t until October 31 that the Brexit deadline hits.
Please let us know what you think in the comments below