The British Pound (GBPJPY) has risen sharply over the last few days vs. the Japanese Yen, and moments ago, the price tried to take out the September 20 high of 135.75. The move higher in GBPJPY was triggered by comments by the President of the European Council, Donald Tusk.
At the start, the GBPJPY spiked lower as Mr. Tusk said that the UK had not presented a realistic and workable proposal.
He also said: “If there is no proposal by today, will announce that there is no more chance at summit.” He also said that he had received promising signals from the Irish Prime minister, Varadkar, and that “even the slightest chance must be used.”
The market took note of the final comments and send the GBPJPY higher by 145 pips from today’s low, and the price was trying to take out the September 20 high of 135.75.
If the price manages to trade above the September 20 high, then that would open up the door for a test of the next resistance level, the July 1 high of 137.77. However, traders will probably pace themselves, as the price has risen sharply over the last few days without any healthy correction.
The nearest major low is the October 8 low of 130.43, and a break of 135.75 with a target of 137.77 will offer a bad risk-reward ratio. Also, the relative strength index (RSI 14) is overbought in the six-hour chart, as seen in the lower panel in the chart below. We also need to remember that any comment by the EU or UK going forward can easily send the pair up or down as just seen.
Going forward, I suspect that the price might try to trigger stop-loss orders above the September 20 high but that the price might move back below the high once more. If it does, then I suspect the price might try to reach the October 1 high of 133.36. The only sure thing is that volatility will remain high.