The British pound fell hard against the Japanese yen to kick off the week on Monday, slicing through the ¥135 level rather handily. In fact, the market even break down below the ¥134 level by the time New York came online. That being said, it does look like there are buyers underneath, but the question is whether or not they can hold? I think at this point it is becoming more and more obvious that the British pound is toxic, and therefore selling rallies will continue to be the best way forward. If you look at the previous week, you can see clearly that the market could not handle breaking back above the 200 day EMA and that was your first clue the trouble was coming.
Looking at the chart, we could go as low as ¥132, so I am waiting for short-term rallies that show signs of exhaustion that I can take advantage of. When those appear, I am more than willing to start shorting again, unless of course something changes drastically with the entire Brexit situation. Right now, that does not look likely to be the case, so I believe that the market will simply fade any signs of strength given enough time.
Further exacerbating the entire situation is the fact that the entire world is essentially in a “risk off mode”, which tends to favor the Japanese yen anyway. With this, it is difficult to be a buyer anytime soon, and I do think that it is probably only a matter of time before we get yet another leg lower.