The British pound has plunged during the course of the trading week as the bond markets continue to be a huge mess at the moment.
The British pound initially felt during the course of the week and spent a couple of days trying to chip away at the ¥160 level. By doing so, it looks as if there are buyers underneath and we could continue to be in a situation where we could see a lot of support near the ¥160 area. If you look at the chart, you can see that we have been bouncing after a major selloff, and now it looks like we are ready to have a go at the ¥162.50 level, especially if interest rates continue to drop.
Keep in mind that the market participants continue to look at the bond markets more than anything else, as the Bank of Japan will almost certainly have to keep dealing with yield curve control. If rates around the world drop, that’s good for the Japanese yen, and that’s part of what we have been seeing this week. On the other hand, if rates start to spike again, that will put a beating on the Japanese yen as they will have to print more of that currency to go out and buy bonds.
The 50-Week EMA is currently sitting right around the middle of the candlesticks, and I think we’ve got a situation where the technicals will continue to be very noisy, therefore we would have a lot of back and forth. When you look at the daily chart, that certainly looks to be the case. Ultimately, the market could make a bigger move next week as the Federal Reserve will make its interest rate decision, because that could give us a heads up as to what bonds in general are going to do.
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Chris is a proprietary trader with more than 20 years of experience across various markets, including currencies, indices and commodities. As a senior analyst at FXEmpire since the website’s early days, he offers readers advanced market perspectives to navigate today’s financial landscape with confidence.