Looking at the British pound, it’s easy to see that we have seen a lot of selling pressure. What I find interesting about the trading session on Thursday is that although there was a huge “risk on” session in New York, simultaneously we were seeing the British pound drop drastically against the Japanese yen. We had major resistance at the ¥145 level, which of course is a large, round, psychologically significant number, and by the end of the day we did of forming a bit of a shooting star shaped candle. This inverted hammer could signal more bearishness going forward.
On a break of the lows from that session, I suspect that the market will probably go looking towards the next major support level at the ¥142.50 level. This is an area that has attracted a lot of attention in the past, so it makes sense that we would go testing that area. If we were to break the top of the candle stick, that is a very bullish sign and could send the market looking towards the ¥146 level.
Quite frankly, the fact that it couldn’t again during the session that has so much risk appetite attached to it tells me one of two things: either the stock markets are going to turn around again tomorrow and start falling, or this pair has catching up to do. The fact that we tried to rally but failed as a major level tells me that it’s more likely that this pair won’t be catching up at all, and we may see sellers come back into the stock market.
Obviously, there is the Brexit component to this pair, but nonetheless if risk appetite can’t pick it up, I don’t know what will. Beyond that, I was paying attention to several other yen related pairs, watching them fall as well, not to mention the fact that the Australian dollar can’t lift either. At this point, I think it makes more sense to sell exhaustion or break of the lows of the Thursday session.