British Pound Continues to Show Extreme Volatility

The British pound has gapped lower to kick off the trading session on Monday, only to turn around and show signs of trying to continue higher. However, we have given up those early gains and it now looks as if we are essentially trying to figure out where to go next. In general, this is a market that has a lot of interest at the ¥155 level, especially now that the 50 day EMA is sitting in that general vicinity. If we can break down below there, then it is likely that we could go looking towards the ¥153.50 region.

GBP/JPY Video 15.02.22

To the upside, the ¥157.50 level is where we had formed a bit of a double top, and that could be a bit of a barrier. If we can break above that level, then it would obviously be very bullish and could send this market much higher. The only thing I think you can count on in this pair is a lot of volatility as it is very risk sensitive, and of course the situation in Ukraine continues to have people going back and forth as far as risk appetite is concerned.

In general, I think we probably go lower but if there is one currency that has refused to buckle, it has been the British pound. The Bank of England is expected to be quite hawkish, so I do think that it is probably only a matter of time before we either see a pivot from the BOE, or a run towards that currency based upon interest rate differential. However, if we get a sudden move in the direction of risk aversion, that will favor the yen.

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