- The British pound has broken significantly below the 190 yen level and then broke significantly lower than that.
- That being said, the market has turned around to show signs of somewhat resilient behavior.
- If we can turn around and break above the 190 yen level, I think that could be a fairly decent sign of bullish pressure.
If we can break above there, then the market could go looking for the 50-day EMA, possibly even the 200-day EMA after that. If we break down below the bottom of the candlestick, then the market could drop to the 187 yen level and then possibly the 185 Yen level. These are a few of the important levels I will be watching if we do drop from here.
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Support Sitting Below
The 185 Yen level is an area that has been important multiple times as support. So, I think you have to pay close attention to it if we do drop from there. But really at this point in time, I think you've got a situation where we are starting to see a little bit of value come into the picture. And despite the fact that the Bank of Japan is suggesting that they are going to lift rates later this year. The reality is that the interest rate differential will continue to be huge between these two currencies and you do get paid to hold British pounds against the yen.
The yen has been a bit of a juggernaut as of late, but I don't know if this is a longer term trade. I think given enough in the meantime, though, we're trying to get our footing, and it is going to be quite noisy. This is fairly common for this pair, and therefore we should be cautious about our position sizing in this market going forward.
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