- During the trading session on Monday, we have seen a little bit of a pullback in the British pound against the Japanese yen to test the crucial 200 day EMA.
- That being said, the 200 day EMA has held so far, and it looks like we are trying to build up enough pressure to turn around and break to the 195 yen level.
- If we can clear that level, then I think it opens up the possibility of a move to the 200 yen level.
All things being equal, GBP/JPY is a pair that is highly sensitive to risk appetite, so you do have to keep that in mind. So, it'll be interesting to see how we behave over the next couple of days as this pullback has been a little bit of relief for those who got a little stretched. And now we have to see whether or not sideways action will build enough of a base here in order to continue to go higher. If we do break higher and clear the 50 day EMA, then I think we've got a situation where the market goes looking to the 200 yen level. If we can break above there, then the 207.50 yen level could be the target.
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If We Break Down
On a breakdown below the 200-day EMA, I believe that the 190 yen level will offer a significant amount of support. Keep in mind that the Bank of Japan continues to be fairly loose with its monetary policy, despite the fact that occasionally they will jawbone the market. The interest rate differential does pay you at the end of every day, and I think a lot of traders will continue to pay close attention to this on a move above the 195 yen level, I do think that more traders will jump in and try to catch a little bit of a FOMO trade at that point.
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