- The GBP/JPY currency pair has fallen rather hard during the trading session on Wednesday, as we continue to see the consolidation range hold.
- The 50-Day EMA has caused a significant amount of resistance, and if the interest rates around the world continue to fall, that should offer a bit of interest into the Japanese and, due to the fact that the Bank of Japan will not have to be aggressive with its bond buying.
- In other words, they will not be printing a ton of yen going forward to protect that 50 basis points level.
Nice Trading Opportunity for Short Sellers
It’s worth noting that there is a bit of a double bottom just above the ¥155 level, and that could be the target if we continue to break down. That obviously is an area of support, and if you look to the left, you can see that it is the basis of a support level based upon a massive hammer. All that ties together quite nicely for a target for short-sellers, so it’ll be interesting to see how this plays out. Breaking down below that double bottom will open up a ton of selling, but I think it’s going to take something rather special to make that happen.
On the other hand, if the British Pound turns around and show signs of life, then the 50-Day EMA, and most certainly the 200-Day EMA, will continue to offer resistance. Breaking above all of that would be a very bullish sign, and it could go to the ¥166 level. That is an area where we have seen a lot of selling pressure in the past, so does make a certain amount of sense that it would be a nice target. I would suspect that this point in time, that would probably coincide with a lot of Japanese yen weakness across the board in the Forex world.
The only thing I think you can probably count on in this market is a lot of choppiness and back and forth, so you will need to be cautious and only add to winners. This is not the time to try to be a hero, and therefore it’s likely you will have to keep a small position initially, only adding as it works out in your favor. We will eventually break out of this box I have drawn on the chart, and I anticipate that will be a very explosive move.
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