The British pound exploded to the upside against the Japanese yen, as the Brexit deal looks to be delayed. This gives hope of the British doing a second referendum, which I don’t think happens. However, the market is pricing in that a better situation than a “no deal Brexit” it’s about to happen.
The British pound exploded to the upside during the trading week, breaking above the ¥143 level easily. On Friday, we are testing the 200 day EMA, pictured on the daily charts. The ¥145 level should offer resistance as well, so I do think that we are getting close to an area where we may see a bit of a pushback. That doesn’t mean that I want to short this pair, what I believe is that we are simply looking at a pullback to find support, perhaps somewhere closer to the ¥142 level.
Keep in mind that this pair is going to be highly sensitive to the Brexit deal, and of course headlines coming out on Twitter and news outlets. Overall, I also believe that this pair will be reacting to the US/China trade, as the pair is typically highly sensitive to global trade. Remember, the Japanese yen is also considered to be a bit of a safety currency, so if we get a lot of bad news out of that scenario, it would put downward pressure on this pair. When you look at the chart, you can see that we are still in a descending channel, which although pierced, we close on the weekly chart back within that range. Because of this, I do think that the upside is somewhat limited, but I do believe that we will go looking towards the top of the channel initially. Look for short-term pullbacks to take advantage of value.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.