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What’s the downside potential for GBP/JPY?


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Flash crash lows in sight

Let’s picture a future where the UK walks the knife-edge on Brexit, or heads to an election that Labour wins, given Boris’ stumbling in the top job. Or a future where risk assets slump on the growing recession in Europe or an escalation in US-China trade tensions.
In any of those scenarios, I can envision an ugly picture for GBP/JPY.
How ugly? A look at the long-term weekly chart shows the flash crash low at 131.70. I don’t really consider that to be a support level. It’s a fuzzy low at best because liquidity collapsed during that drop and it hasn’t exactly ‘proved’ itself.
Beyond that, it starts to look like the low 120s are in play. That’s 1200-1300 pips away.

In the big picture, the chart stalled at the 50% retracement of the 2015-16 drop and it’s just sorta slowly rolled over since the start of 2018.

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