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The British pound initially tried to rally during the trading session on Monday, but then broke down significantly to breach the ¥134 level. At this point, the market is looking very likely to continue rolling over because of the hammer at the ¥135 level has been broken to the downside and ended up being a “hanging man.” That of course is a very negative technical signal, and now quite a few traders are trapped and trying to bail out by selling their long positions.
GBP/JPY Video 24.09.19
It has been an interesting and significant rally by the British pound over the last couple of weeks, but quite frankly things a gotten a bit overdone. The 38.2% Fibonacci retracement level has offered resistance and of course it is a major technical level anyway. Beyond that, there is the large, round, psychological significance of the ¥135 level, so with all of that in the fact that the Brexit issues continue, there’s no reason to think that this market was going to continue to go higher over the longer-term anyway.
The plethora of issues out there continue to drive this market towards the safety currency, and therefore we should see lower pricing. Ultimately, this is a market that the weight of an overextended move is going to continue to drop this market towards the lows again unless something changes drastically. It seems very unlikely that the rallies will stick, unless of course we get some type of major advance in the negotiations between the United Kingdom and the European Union. All things been equal though that doesn’t seem very likely.
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This article was originally posted on FX Empire