- The British pound initially fell against the Japanese yen during trading on Friday, only to turn around and show signs of life, as the market has seen quite a bit of volatility.
- At this point in time, the GBP/JPY pair continues to look at the ¥187 level.
- With that being said, the market is likely to continue to be very noisy, but I do think that the ¥185 level will be important, as it has been important multiple times in the past, and I think that will be the way forward at this juncture. As long as we can stay above there, then I think the British pound has a chance to turn things around and show signs of life.
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This is a market that I think given enough time we will have to sort out what was to do next, but in the meantime, I think we should probably look at this as being in the middle of a consolidation pattern, with the ¥185 level on the bottom in the ¥190 level on the top. As we are basically hanging around the ¥187.50 level, we are essentially in the middle of this range, and therefore you can make an argument that we are basically at “fair value.”
If we were to break above the ¥190 level, then I think we have a real shot at this pair going much higher, perhaps to the ¥195 level, and also I think you could see the Japanese yen get hammered against most currencies, not just this one. On the other hand, if this pair were to break down below the ¥185 level, then there’s a real shot that the Japanese yen strengthens against almost everything else as well. At this point, it seems like it’s all about the Japanese yen and the safety trade, which of course the Japanese yen is considered to be a “safety currency.” Until things settle down, it’s probably somewhat sluggish to the upside.
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