The British pound rallied a bit against the Japanese yen during the trading session on Monday to kick off the week in a positive manner. This was due to the flow of risk appetite coming out of China as equities spiked after Chinese economic statements coming from the centrally planned government suggested that “everything is awesome.” At the end of the day, it is probably just rhetoric and it more than likely does not change anything, but we are making “higher lows”, which is something that is worth paying attention to. The question now is whether or not that was a small “double bottom”, or is it simply a support barrier at the ¥132 level that traders will aim for?
GBP/JPY Video 07.07.20
We are currently trading between the 50 day EMA and the 200 day EMA, which quite often will signal either support or resistance. That does not mean that you should simply start shorting right away, just that there is potential for a bit of a pullback. If we break down below the lows of the Friday candlestick, then you have an opportunity to start shorting again.
A break above the ¥135 level probably opens up a move towards the 200 day EMA which is about 100 pips above there. At this point, I think that with all of the moving pieces in the economic picture, it is likely that you will see choppy trading regardless of the direction that we decide to go. Any time I start to see hammers and shooting stars next to each other like we had last week tells me that we are more than likely trying to determine the next trading range.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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