The British pound initially tried to rally during the week but gave back the gains to slice through the bottom of the hammer from the previous week. This of course is an extremely negative sign, and as we are testing the ¥130 level, it is likely that if we can break down below there it will signal fresh selling, perhaps a run down to the ¥127.50 level, possibly even the ¥125 level. Looking at this chart, it certainly has been in a downtrend for some time, but this recent bounce has caught a lot of people off guard. You should also keep in mind that the markets around the world have shown a decidedly “risk off” type of attitude of the week, so this moves right along with it.
GBP/JPY Video 18.05.20
On the other hand, if we turn around a break above the €132 level, then you have to reassess the longer-term move and potential trend. At this point in time though, it looks like we are decidedly negative and quite frankly probably should be considering how expose the United Kingdom is to the coronavirus, we have the Brexit to worry about, and of course the Japanese yen is a safety currency in a time of extreme negativity. It looks likely to be a continuation that we are looking at. However, do what the markets tell you and of course be aware the fact that the headlines continue to cause massive volatility.
This article was originally posted on FX Empire
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