The GBP/JPY pair fell hard during the session on Wednesday, slamming into the 157 handle. However, we do get a little bit of a bounce but I still feel that this market is probably heading down towards the 155 level before it's all said and done. This is predicated mainly upon the fact that it is a supporting resistance area anyway, and on top of that it is a large round psychologically significant number.
Nonetheless, I think that traders will have an opportunity to sell this market and pick up about 150 pips in the short term. Whether or not we can get below the 155 handle is a completely different question, but I think that it is an excellent place to find some type of supportive price action in order to go long again. After all, this market has been very bullish lately, and the British pound itself looks rather strong overall.
Reversal candle? Or just a simple pullback?
The real question is whether or not this is a reversal candle, or if it's just a simple pullback waiting happen. After all, the candle is rather negative, but it is in an uptrend, so it can either be a significant pullback waiting happen, or exactly be a reversal. I tend to believe that it's actually a pullback, simply because the Bank of Japan is so loose with its monetary policy at the moment that it would make sense that the Yen would continue to weaken against most currencies out there, perhaps with the exception of the US dollar. That being the case, as the British pound has done fairly well against most other currencies, it makes sense to me that this pair goes higher.
To me though, the real fight is going to be a 160, where there seems to be a ton of resistance. One other or not we can get above there is another question, but at the end of the day I certainly think it will be one of the most important questions that we ask of this currency pair.
