The British pound rose against the Japanese yen again on Monday, as we continue to see the ‘carry trade’ play out.
GBP/JPY
The British pound has risen during the early part of the trading session on Monday as we are starting to see the Japanese yen soften a bit. That makes a certain amount of sense, considering the interest rate differential between the two currencies and, of course, the fact that the Bank of Japan is essentially stuck while the Bank of England is still offering much higher rates and likely to be a little bit more stubborn.
Top Regulated Brokers
You can see that we have seen such a nice, strong uptrend since 2020, and nothing has changed here. I think we still have a buy on the dips scenario as we have a longer-term destruction of the Japanese yen ahead of us. I'm playing all the yen-related pairs with small positions. I'm not trying to jump in with both feet because you get paid at the end of every day, and you can take advantage of the overall interest rate differential, gradually padding your account. It's the simple carry trade.
The Carry Trade Dynamics and Key Yen Levels
The 215 yen level is an area that has been important in the past, so it could offer a bit of support if we are driven down to that area. It's worth noting that the 50-day EMA is in that same region as well, offering a potential support level for technical traders, also.
To the upside, the next large round psychologically significant figure is the 220 yen level. Overall, this is a market that I think, given enough time, probably has to determine whether or not we are still going to short the yen. And I think looking around the markets, it will be a pretty obvious scenario one way or the other because, quite frankly, the yen-related pairs all tend to move most of the time in the same direction. So, one way traders can take advantage of that is to look around the world and sort out which ones are doing what and whether or not we continue to see that same pattern play out.
Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.