GBP/JPY Forecast September 9, 2016, Technical Analysis

The British pound fell initially during the course of the session on Thursday, but found enough support at the 135 level to turn things around and form a hammer. Having said that, there are several things going on at the same time in this specific region that has caught my attention. With this being the case, I would name that the 135 level is a large, round, psychologically significant number, and of course we also have the 38.2% Fibonacci ratio in that general vicinity. Adding more bullish pressure is the fact that 50-day exponential moving average is just above, and if we can break above there it would be a very bullish sign. It could also offer quite a bit of dynamic support.
If we do break higher, I believe it’s only a matter of time before we reach towards the 140 level. This is an area that has a long history of being important in this pair, and as a result it would not surprise me very much if we struggled and that overall vicinity. This is mainly because the British pound itself isn’t necessarily a loved currency, but on the other hand of the currency pair you have the Bank of Japan working against the value of the Japanese yen. So having said that I believe that this move is probably more about what’s going on in Tokyo than in London.
If we did break down below the bottom of the hammer, I think that would be a very negative sign and could send this market back down to the lows given enough time. That would be a move all the way down to at least the 130 handle, and possibly just a little bit below there. In other words, I do feel that we have a significant move coming, and right now it seems to be leaning towards the upside. However, a failure here would also be a very strong selling signal, so we the way I feel that a move is about to happen in this currency pair.

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