- The British pound collapsed pretty significantly against the Japanese yen during the trading session on Friday, slicing through the crucial ¥198 level, an area that short-term traders have been watching very closely.
- Because of this, I think it suggests that perhaps market participants are going more “risk off”, as the Japanese yen is considered to be a safety currency.
Technical Analysis
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The technical analysis for this pair is obviously in a state of flux as we just printed a massive red candlestick. A nasty red candlestick for the trading session on Friday might be enough to entice buyers, but quite frankly I think it’s asking a lot for markets to suddenly turn around. It’s very possible that the British pound could drop to the 200 Day EMA which is at the ¥194.23 level, before bouncing again. It’ll be interesting to see if that actually plays out, but I also recognize that a lot of this comes down to risk appetite overall.
The ¥198 level above probably ends up being a major barrier, but if we can break above there then we will threaten the ¥200 level again. Keep in mind that the area in the 200 point range has been resistant a couple of times in the past, so one has to ask questions as to whether or not we just found the top of a longer-term consolidation area that might hold. If we break down below the 200 Day EMA, we could very well see this market drop down to the ¥187.50 level, maybe even as low as the ¥184.50 level. This will almost certainly have everything to do with risk appetite and the overall attitude of markets in general. After all, there are a lot of different things going on at the same time, and this does have a lot of traders somewhat concerned. Ultimately, I think we’ve got a situation where traders are looking at this through the prism of a wondering whether or not the markets are about to see a major shift in attitude.
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