British pound faces uphill battle against Japanese yen

AUD/CHF showing signs of failure at resistance
November 26, 2018
New Zealand dollar stretched against Canadian dollar
December 27, 2018

British pound faces uphill battle against Japanese yen

During the early hours of Wednesday, the British pound has rallied significantly against the Japanese yen, reaching towards the ¥143 level as the Americans take over. However, I think this is more of a short covering rally than anything else, as there is a confidence vote on Teresa May in a few hours. Ultimately, I think that there could be more of a follow-through to the upside due to the “feel good relief rally” that could happen. However, once the dust settles, we still have a lot of the same issues which sets up a nice technical trade from what I see.

I believe that we will do one of two things, both of which involve selling. We will either find the ¥143 level to be a bit too resistive, and rollover, reaching towards the ¥140 level which is massive support. When you look at the chart, the 200 day EMA is starting to rollover, showing signs of negativity longer term and of course we have been in a downtrend channel for some time. I think that the machines are being turned off and short covering is the biggest mover of the markets early. However, I’m looking to fade a lot of bullish pressure to the upside because after the vote is done, we still have all of the same issues. It’s just that we have possibly avoided yet another issue more than anything else.

The yellow ellipse on the chart is an area where I’m very interested in trading to the downside, and I have no interest whatsoever in buying this pair. The higher we go, the better the risk to reward ratio will be for my trade. I believe that if you wait for an opportunity to short this market, it will present itself.

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