During Monday's trading session, the British pound initially pulled back slightly against the Japanese yen but ultimately rebounded to show signs of strength. The Japanese yen was losing strength against currencies across the board, contributing to the pound's recent gains.
The market is approaching the top of its overall range, with the ¥166 level acting as significant resistance. However, the market is also expected to be very noisy and will likely face significant selling pressure just above this level.
In the event of a pullback, the 50-Day EMA is currently near the ¥162.50 level and has recently crossed above the 200-Day EMA. This could suggest that the market will find plenty of buyers on dips. However, given the market's propensity for volatility and risk appetite moves, caution should be exercised with position sizing.
Breaking above the shooting star that formed last week could be a key indication that the market is ready to move into a "buy-and-hold" phase. However, a breakdown below the moving averages would open the possibility of a move toward the ¥160 level, which is an area of significant previous support and a psychologically significant figure.
Volatility Ahead
- It's worth noting that the most recent pullback was much shallower than the previous one, suggesting that more pressure is building to the upside than to the downside in this pair.
- If interest rates start to rise, the Bank of Japan's yield curve control policy could put significant pressure on the Japanese yen, which would likely benefit the British pound.
Overall, the British pound is expected to continue experiencing a significant amount of volatility in the coming weeks, as it navigates resistance levels and risk appetite moves. While there are potential buying opportunities to be found, investors should approach the market with caution and be prepared for potential ups and downs.
The market's recent behavior has been driven by the Bank of Japan's monetary policy, which has been keeping interest rates low to stimulate the economy. If this policy changes or interest rates begin to rise, it could impact the pound's performance against the yen.
Investors should keep a close eye on developments in global markets, as these could also have an impact on the British pound's value. Overall, managing risk through appropriate position sizing is critical to success in this type of volatile environment. Investors should remain vigilant and be prepared to adapt to changing market conditions as they arise.
