The British pound has initially sold off of the week but as you can see has recovered quite nicely. With that being said, the market is likely to continue looking at this situation with a bit of skepticism, as we have seen so much volatility and “risk off behavior” around the world. If that is going to be the case, then it does make a certain amount of sense that this pair would fall as the Japanese yen is most certainly considered to be a safety play.

GBP/JPY Video 31.01.22

On the other hand, if we can break above the ¥155 level substantially, then we may have another crack at those recent highs. If we can break above those peaks, then it is likely that this pair goes much higher, it becomes more or less a “buy-and-hold” type of situation going forward. A lot of external help is needed though, because of course of the fickleness of this pair and of course the fickleness of risk appetite in general.

Because of this, I am very cautious about putting a lot of money into this market right away, but it certainly does seem to favor a bit of a pullback at this point considering everything else that is going on in the financial markets. As long as that is the case, I do not really have a scenario in which I feel comfortable going long of this pair in the short term. If things change, obviously I will as well.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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