- The GBP/JPY currency pair has shot higher during the trading session on Monday, to kick off the week with a bang.
- When you look at the chart, you can see that we clearly attacked the 50-Day EMA but have found just a little bit of resistance.
- By doing so, it looks as if the market is going to continue to see volatility, as there is significant resistance just above current trading.
Sellers Waiting to Get Involved
I believe that the ¥162.50 level is an area where a lot of sellers are going to get involved, and it’s further backed up by the 200-Day moving average being right there. This of course attracts a lot of attention, and therefore I think we’ve got a bit of a fight on our hands. If we can break through all that, then it’s likely that we go much higher, perhaps reaching toward the ¥167.50 level. That’s an area we have sold off from quite viciously, and I think that will continue to have an influence on the market. If we break above there, then we can really start to take off to the outside.
For what it is worth, it looks as if we have been forming a bit of a basing pattern for a while, so now it comes down to whether or not we get enough momentum to go higher. With interest rates around the world rallying, that could put enough downward pressure on the Japanese yen to make this happen. After all, we are still in the same scenario where the Bank of Japan is going to continue to see the desire to keep interest rates below 50 basis points, and therefore when interest rates rise around the world, they will be printing more currency. It’s also worth noting that the chart pattern has gradually gotten a little bit more bullish over time, so I think that’s something that needs to pay close attention to as well.
The size of the candlestick does suggest that we have plenty of buyers underneath, so we will have to wait and see if we get some type of follow-through. If we do in fact get that follow-through, then I think it’s likely to be a pretty decent move. However, if we turn around fall from here, I think there is plenty of support underneath, especially near the ¥156 level.
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