- The British pound has rallied a bit against the Japanese yen, but really at this point in time, it is giving back quite a bit.
- So, what the wait and see whether or not we can keep up the momentum.
- It is worth noting that underneath we have the 200 yen level and that is an area that I think will continue to attract a lot of attention.
But the fact that we broke out to a fresh new high before pulling back also suggests that we are more likely than not going to see a continued move higher, even if we do get a pullback at this point.
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Interest rate differential continues to be the major driver
Remember there is a major interest rate differential between the two currencies and therefore you get paid to hang on to this pair and that's something worth paying attention to. In fact, for some currency traders, it's the only thing worth paying attention to. The Bank of Japan does have a meeting early on Friday, and unless they do something completely unforeseen and drastic, it's very likely that it'll be yet just another blip on the radar on our way higher. I do think this pair continues to climb much higher because quite frankly, the Japanese have so much debt that they cannot sustain higher interest rates.
If we were to break down below the 200 yen level, then we may get a deeper correction toward the 198 yen level, but that should just offer more value. After all, we've broken through the area that the Bank of Japan had intervened at previously. I do anticipate a little bit of volatility going a little higher, but really at the end of the day, I do think that we go much higher, and really don't have a target at this point. I'm just simply following the trend over the longer term, as I recognize that the Bank of Japan is essentially stuck with its monetary policy.
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