- The GBP/JPY has had a relatively stable trading session against the Japanese yen on Monday, as we are hanging around just below the 50-Day EMA.
- If we can break above that level, then it’s possible that we could go to the ¥168 level. After that, we could go as high as ¥170 given enough time.
- Ultimately, this is a market that has been very noisy and difficult to deal with at times, but at the end of the day this is probably going to be more about the Bank of Japan than anything else.
The 200-Day EMA sits at ¥162 area and rising, and therefore it’s likely that we could see some stability in that region as well. All things being equal, this is a market that I think will eventually find buyers, because the Bank of Japan will continue to fight rising rates, no matter what else happens. Granted, the pressure is being eased on the Japanese of the last couple of days, but it’s very likely we continue to see the market turnaround.
Be Cautious With Your Position Sizing
If we do break down below the 200-Day EMA, it’s possible that the British pound continues to plummet toward the ¥160 level, where there is a significant amount of support based upon historical price action. If anything below there then all bets are off, we could go much lower.
It’s difficult to imagine a scenario where the Japanese yen suddenly get strong without the Bank of Japan stepping away from its monetary policy of keeping rates low. If they do that, the Japanese yen will probably explode in value, and you will see all yen-related pairs fall. However, without that, it’s very unlikely that happen. Ultimately, I do believe that this is a situation where the markets will be very noisy, but I do think that we are in the process of finding buyers to reverse the correction that we have formed. Furthermore, you can even make an argument that perhaps we are during forming a falling wedge, which can be a very positive candlestick pattern as well. Beyond that, I would also point out that being between the 50-Day EMA and the 200-Day EMA indicators typically means that you are going to see a bit of a squeeze. Because of this, be cautious with your position sizing.
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