- The British pound initially fell during the trading session on Wednesday, breaking below the ¥200 level, only to turn around and show signs of life.
- The market ends up forming a hammer on both Tuesday and potentially Wednesday now, suggesting that the buyers are in fact starting to fight back.
- The Japanese yen got a little bit of a boost after some members of the Bank of Japan suggested that perhaps they would have to do something about the weakness of the Japanese yen, but at this point in time the Japanese cannot afford higher interest rates of any real circumstance, as the Japanese economy is far too indebted to carry that load.
Pullback
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I think this pullback makes a certain amount of sense considering that the ¥205 level offered significant resistance that we are now seeing a bit of a pullback. The question is whether or not we can pick up any momentum to the upside. If we do, then I’m a buyer of this pair because of the pullback giving me an opportunity to get involved in a obvious move to the upside, and of course a massive amount of interest rate differential that comes into the picture. The 50 Day EMA currently sits at the ¥200 level, so that makes that level even more important, and I think it’ll be interesting to see if we can stay above there. As long as we stay above the ¥200 level, then I think it’s a “buy on the dips” market, but I don’t necessarily think I would throw a ton of money into this market right away.
I think this is the beginning of something bigger, and the question will be how much further can it go to the upside? I think at this point in time the ¥210 level is a very reasonable target, surprise me if we end up going much higher than that. I have no interest in shorting this market until we break down below the ¥198 level, something that doesn’t seem very likely at the moment.
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