- The British Pound continues to climb against the Japanese Yen as persistent yen weakness and wide rate differentials drive the trend.
- Pullbacks remain shallow and carry incentives to support buyers as long as global risk conditions stay stable.
The British Pound has rallied a bit during the trading session on Monday, breaking above the 207 Yen level, and in fact is looking like it's trying to get to the 208 Yen level. This is a pair that is focusing, I believe, mainly on the Yen because, quite frankly, the Bank of England is likely to cut rates this month.
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But at the same time, the Bank of Japan is so stuck in its loose monetary policy that even if it did raise rates, it wouldn't be enough to make the difference up. Global liquidity requires cheap funding out of Japan, and I think that will continue to be the mainstay of the asset bubbles that everybody enjoys.
Pullbacks and Trend Considerations
Short-term pullbacks are buying opportunities, and I do believe that the 50-day EMA at the very least is your floor, and that is right around the 203.62 Yen level and rising. As long as we don't get some type of major meltdown on a global stage, I expect the Japanese Yen to continue to weaken, but I don't know that we won't get the occasional pullback. You'll just have to make sure that you have enough space for your stop loss to take advantage of these dips and, more importantly, hang on to the trend.
You get paid at the end of every day to hold this pair, and that's something that I like. It helps soften the pullbacks, and of course, you also have to keep in mind that even if the Bank of England cuts rates, you can still drive a truck through the interest rate differential when it comes to these two currencies.
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