We had a very nasty rally in GBP/JPY from sub 140 to above 150 in a very short space of time as speculative shorts started covering. Now, after another reminder on Friday of the poor state of the UK economy, I feel like being short sterling against something.
EUR/GBP has now put a base in at .90 and is likely to start trading higher but a quick look at the EUR/JPY chart shows that we are smack on major resistance in the form of a very flat trendline drawn from 139.20 through 138.70. (This formation is likely to develop into a wedge which is generally a continuation pattern but that still leaves scope for a fall back towards 130). Therefore I chose to go short GBP/JPY rather than buy EUR/GBP. The 200-day MA at 152.85 is the main technical focal point on the topside and only a daily close above there will alter the near term bearish outlook. I will add on rallies back towards 152 and I will also feel very comfortable selling cable rallies should it get back towards 1.6500.