The British pound has gone back and forth during the trading session on Tuesday, as we continue to see the area around the ¥163 level offer a bit of support. That being said, we had recently broken out to the upside and reached the ¥165 level. However, we have seen this market turn things back around and drop from there. Now it comes down to whether or not we can pick up any type of momentum.
Keep in mind that the British pound has seen a little bit of momentum, but it is struggling now against other currencies such as the US dollar. However, the Japanese yen will continue to be soft due to the fact that the Bank of Japan continues its yield curve control, keeping interest rates on the 10 year JGB down to 50 basis points. This means that they are printing unlimited yen in order to keep those yields down by purchasing bonds. As long as that’s going to be the case, simple supply/demand trading will suggest that the yen will continue to see a lot of negativity.
The 50-Day EMA sits underneath and is getting ready to go to the upside, breaking above the 200-Day EMA. That would be the so-called “golden cross”, which a lot of people will pay attention to. That being said, it’s obvious that the ¥165 level is important, as we formed a shooting star in that general vicinity. If we can break above that shooting star, then it’s likely that we could go to the ¥167.50 level.
Pullbacks should continue to see plenty of support near the moving average is underneath, and of course the ¥161.50 level, an area that previously had been important, therefore I think it’s only a matter of time before buyers would jump back into the market and try to pick up value. If we break down below the ¥160 level, that could send this pair much lower, but I suspect that if you are looking to buy the yen against the currency right now, it probably wouldn’t be the British pound anyway, but perhaps something like the New Zealand dollar that will move much quicker.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.