- During the Friday session we have seen the British pound rallied against the Japanese yen, touching the 200 Day EMA before pulling back a bit.
- This is a market that has been going sideways for a while, and there doesn’t seem to be much changing at the moment.
- This does make a certain amount of sense, because despite the fact that the Japanese yen has been relatively strong against most currencies as of late, the reality is that the interest rate differential between these 2 economies is massive, despite the fact that Japan might actually raise rates later this year.
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We are currently trading right around the 50 Day EMA as well as the 200 Day EMA indicator. These are flat, and it suggests that the market is probably going to continue to be somewhat range bound, which I think makes a certain amount of sense. I would pay close attention to the candlestick from the Wednesday session, because if we can break above there, it’s likely that we could go looking to the ¥195 level.
If we were to break down below the bottom of the candlestick from the Thursday session, then we will almost certainly test the ¥190 level, which of course is a large, round, psychologically significant figure that will attract a lot of attention in and of itself. Anything below there opens up the possibility of a move to the ¥188 level, which has served as a bit of a floor in the market over the last several weeks.
I do think at this point in time we are more likely than not going to see a return of the average “carry trader” as the interest rate differential is just too big to ignore. After all, nobody likes paying swap at the end of the day to get short of currency pair, and this is especially true when you are talking about larger positions which can add up quite drastically while holding.
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