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Christopher Lewis
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GBP/JPY

The British pound initially tried to break above the ¥155 level during the course of the trading week, but then broke down rather significantly to reach down towards the ¥152.50 level. This is an area that should be thought of as a potential support level, but this type of candlestick typically gets a little bit of follow-through. While this is a very negative candlestick, you should keep in mind that it is not until we break down below the ¥150 level that this trend is truly broken, because it could be a huge “air pocket” underneath there due to the fact that we went straight up in the air to get to that level.

GBP/JPY Video 21.05.21

If that were to happen, one would think that it would be very negative for risk appetite around the world, which is something that we are seeing in general. With that being the case, I think that what we will probably look at is a potential pullback that tries to find buyers as we “reset” the entire situation. However, if we break down below the ¥150 level with any type of force, it is very likely that we will drop at least 500 pips, if not a thousand. To the upside, if we were to turn around and show signs of life it is likely that we would try to get back to the ¥155 level. All things been equal, I think the only thing that you can probably count on is a lot of volatility in this general vicinity, as the market reassesses the idea of a tightening Federal Reserve. This has sent ripples through the markets everywhere.

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

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