The British pound experienced a back and forth trading session on Tuesday as it struggled to pick up momentum. Despite recently breaking out to the upside and reaching the ¥165 level, the market turned back around and dropped from there. Currently, the British pound is struggling against other currencies such as the US dollar, but it is important to note that the Japanese yen will continue to be soft due to the Bank of Japan's yield curve control.
The Bank of Japan's decision to keep interest rates on the 10-year Japanese government bond (JGB) down to 50 basis points has resulted in the printing of unlimited yen to purchase bonds. This has resulted in simple supply/demand trading suggesting that the yen will continue to see a lot of negativity.
- Technical analysis shows that the 50-Day EMA is preparing to go to the upside and break above the 200-Day EMA, which is known as the "golden cross" and is a signal that many traders pay attention to.
- The ¥165 level is also important as a shooting star was formed in that general vicinity.
- If the market can break above the shooting star, it is likely that it could go to the ¥167.50 level.
- However, if it breaks down below the ¥160 level, the pair could see a much lower drop.
Despite the struggles of the British pound against the Japanese yen, the market will still see plenty of support near the moving averages underneath and the ¥161.50 level, an area that had previously been important. As a result, buyers will likely jump back into the market to pick up value.
If investors are looking to buy the yen against a currency, it may not be the British pound but rather something like the New Zealand dollar. This is due to the fact that the New Zealand dollar may move much quicker than the British pound.
In conclusion, the British pound has struggled to pick up momentum against the Japanese yen but is still seeing support near moving averages and key levels. The Bank of Japan's yield curve control will continue to keep the Japanese yen soft, resulting in negativity towards the currency. Technical analysis suggests that breaking above the ¥165 level and the shooting star could lead to a rise in the market, while breaking down below the ¥160 level could lead to a significant drop. Traders may want to consider other currencies, such as the New Zealand dollar, if they are looking to buy the yen.
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