Potential signal
I would be a buyer here, but if we drop below 207 – I am out.
Would aim for 212 level.
The British pound has rallied a bit against the Japanese yen during trading on Monday, as we have bounced from the crucial ¥207 level. Of course, the interest rate differential continues to favor the British pound over the Japanese yen.
The Bank of Japan has intervened a couple of times recently, but quite frankly, that's about the only way this pair goes down for any significant amount of time. Keep in mind that even though the Bank of England did see three members talk about cutting rates last time, ultimately, even if they were to cut, this is a pair that you could possibly hang on to.
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A move above the 210 yen level opens up the possibility of a move to the 200 day EMA
A move above the ¥210 level opens up the possibility of a move to the 200-day EMA, which is at the ¥211.50 level. Nonetheless, I think this is a market that we are likely to continue to see short-term dips as a potential buying opportunity, as long as the GBP/JPY pair can stay above the ¥207 level.
The market has been very noisy and choppy, but if we were to break down below the ¥207 level, then I think it opens up the possibility of a move down to the ¥205 level. That would be a very pro-Japanese yen move, and it would probably see the Japanese yen strengthening across the board.
All things being equal, this is a market that I think continues to see a lot of noisy behavior. Ultimately, this is a market that I think will probably continue to see a lot of volatility. Of course, all the noise out there with energy inflation is a big factor as well.
While the British do import quite a bit of their energy, the Japanese import all of theirs, and Asia in general is an ugly place to place your bets at the moment. The one thing that supports the yen would be potential intervention, but that seems to be less and less effective.
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