- The British pound has gone back and forth during the trading session against the Japanese yen on Tuesday as we continue to see a lot of noisy volatility.
- All things being equal, I think we will be paying attention to technical analysis more than anything else here because the Japanese yen has been very noisy to say the least.
- Remember, the Bank of Japan now is starting to complain about inflation, which is something that we're not used to seeing.
The Japanese yen has strengthened as a result as interest rates are going higher in Japan. But at the same time, you also have to recognize the fact that the interest rate differential between Great Britain and Japan are about a mile wide. So I think you've got a situation where buyers will try to pile back into this GBP/JPY pair sooner or later.
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This would be especially true if the British pound continues to strengthen against other currencies like the dollar, but we'll just have to wait and see. Speaking of technical analysis, when you look at this, it's hard not to notice that the 50-day EMA as well as the 200-day EMA is sitting just above and offering resistance.
In this environment, we could see a scenario where if we can break above there, then it opens up a move to the 195 Yen level underneath the 190 yen level, I think it continues to be very important as support. And I do think that we try to hold that if we were to break down below there, then the 188 yen level could be an area of interest as well. But really, at this point in time, I think we are starting to stabilize and should eventually see some type of impulsive candlestick that we can follow.
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