The British pound initially tried to rally against the Japanese yen during the trading session on Wednesday but rolled over a bit to show signs of weakness again. The market has done a lot of technical damage over the last couple of weeks, and at this point I think that the ¥140 level continues to be a significant barrier above. If we can break above the ¥141 level, then perhaps we could go higher. However, until we do that I am not convinced about the efficacy of a rally.
GBP/JPY Video 10.01.19
Keep in mind that this pair is rather wrist sensitive, but more importantly it is attached to the Brexit as those negotiations are not going well at all. I think there are plenty of reasons to suspect this pair will roll over again and reach down towards the lows. We had broken through the bottom of the descending channel but bounced back rather violently. However, the one thing that I would point out is that we did not manage to wipe out that nasty bearish candle that sent us so much lower. Because of this, I think there is still a lot of selling pressure just above, and therefore we have simply been in the middle of a “dead cat bounce.” I anticipate that it’s only going to take the odd negative headline to send this pair right back down to the lows, as the Japanese yen looks likely to strengthen in 2019 overall, especially against the currency that has so much uncertainty attached to it.
This article was originally posted on FX Empire
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