During trading on Monday, we rallied rather significantly in the GBP/JPY pair yet again as the ¥144 level continues offer massive support. That’s an area that of course has attracted attention several times, and now we have broken back above the 200-day EMA as well as the psychologically important ¥145 level.
Recently, headlines have come out to knock the British pound around involving the UK parliament and of course the Brexit situation overall. At this point, it’s obvious that every time we break down due to some type of headline, value hunters come back into the marketplace. Ultimately, the fact that the candle look so strong suggests that we are going to go back towards the top of the overall consolidation area which is near the ¥148.50 level. That’s essentially a “zone” that extends all the way to the ¥150 level above which of course also is a large, round, psychologically important figure and of course an area that attracts a lot of attention.
Overall, you can also see that I have a bullish flag drawn on the chart, which has of course been broken to the upside and then tested a couple of times, at least horizontally. That flag measures for a move to the ¥155 level, and that is the longer-term projected target. However, understand that it is going to be very difficult to break above the ¥150 level, and quite frankly we probably need some type of resolution to the Brexit situation. Once we get that, then historically speaking the British pound is without a doubt very cheap compared to where it typically has been in the past. At this point, it looks as if there are a lot of value hunters out there looking at Sterling and adding to their position every time we did. Current trading suggests that the ¥144 level is crucial.