- During the trading session on Friday, we have seen the British pound all over the place against the Japanese yen.
- Ultimately, the market did test the ¥190 level, which is a large, round, psychologically significant figure, but it’s also an area that has been important more than once.
- Because of this, and the fact that we pull back from there so quickly, the market is likely to continue to look at this area as crucial.
If we break down from here, and perhaps below the low of the trading session, then we could see the British pound Paul significantly, perhaps down to the crucial ¥185 level. The ¥185 level of course is an area that’s been important a couple of times in the past as well, and this is something that a lot of people will be paying close attention to. Anything below there could get really ugly in a very short amount of time.
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Risk Appetite
The risk appetite component of this pair shouldn’t be ignored, as the British pound does favor the upside in this pair when traders are feeling better about the overall economic prospects. Ultimately, this is a market that will continue to look very much like a market that is trying to determine whether or not we have found the bottom, but I think it’s a little early to say that. The size of the candlestick for the day of course is fairly important as it shows just how volatile and dangerous this pair could be. That being said, the market will have to make a bigger decision, and once it does, I think that we could see a very big move.
I favor the upside, mainly due to the interest rate differential, and the fact that the Bank of Japan can only raise interest rates so far, I suspect that we will eventually see this market take off. If and when it does, it could be a very brutal move to the upside.
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