GBP/JPY Forecast October 19, 2017, Technical Analysis

The British pound went sideways against the Japanese yen initially, but then shot through the roof, reaching towards the 149 handle. That’s an area that has been resistive in the past, and I think that given enough time, we will break above there and reach towards the 150 level, which of course is a large, round, psychologically significant number. Ultimately, I think that the market will cause volatility going forward, because it is so sensitive to the risk appetite around the world. The GBP/JPY pair rallies when people were feeling good about taking risk, while a pullback in this market is to be seen if traders become concerned. After all, the Japanese yen is a safety currency, while the British pound is not only considered to be riskier, but we also have the noise coming out of the negotiations between the United Kingdom and the European Union, so this market will not only be volatile as per usual, but it will be even more so as negotiations continue.
I believe that the 148-level underneath will offer support, and I think that pullbacks will be thought of as value, but if we were to break down below that level, I think next, we would go to the 147 handle. That’s an area that breaking down below would be very negative, and probably have this market looking for the 145 handle almost immediately. However, I believe that given enough time we should see the market go higher rather than lower, but keep in mind that headlines can make this market very dangerous, and because of this small position sizes are recommended. Once we break above the 150 handle, then I think that we will be able to pick up enough momentum to go heavier with our position size. Until then, it’s amazingly dangerous.