- Taking a look at the British pound against the Japanese yen the British pound has initially pulled back just a bit only to turn around and show signs of strength.
- At this point in time the market is likely to look at the 190 yen level as a major barrier to overcome and if we can then it would be an extraordinarily bullish sign.
- After all, we formed a couple of inverted hammers, so breaking the top of an inverted hammer obviously captures a lot of attention.
A Potential Melt Higher?
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In that environment, I think you have to look at the market through a potential melt up. I don't have any interest in trying to get too cute here. I think it's a simple matter of waiting to see if we can break above that 190 yen level on a daily close if we can then I think that's a very positive sign if we can't, then it shows that we are going to pull back and go looking at the 188 yen level again. In general, I don't necessarily like jumping into the market right here, I want to see what the reaction is to this major inflection point.
I think ultimately, you've got a scenario where a lot of traders will be looking at this through the idea of whether or not we can continue to go higher or if the exhaustion comes back into the picture, because the interest rate differential does favor the British pound, but it also is a scenario where the Bank of England just cut rates and they look like they're going to continue to cut rates while the Japanese central bank of course is now starting to worry about fighting inflation. So definitely at this point in time we are at a major inflection point, but you need to watch this 190 yen level for clues.
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