- The British pound initially rallied a bit against the Japanese yen, but as you can see, it has given back quite a bit of the gains as this is a market that remains very soft.
- You have to keep in mind that the Bank of England just cut interest rates by 25 basis points the other day.
- In fact, a couple of people on the monetary policy committee were suggesting we needed to see 50 basis points in cuts.
At the same time, you have the Bank of Japan mulling the idea of tightening monetary policy due to the fact that inflation is a problem in Japan for the first time in like 20 years. So, with that being the case, I do think that there is still more of a downward bias in this pair, perhaps to reach as low as the 185 yen level. Rallies at this point in time, I would treat with suspicion with the 190 yen level being an area I'd pay close attention to. If we can break above there, then we could challenge the 192.75 yen level where the 50 day EMA and the 200 day EMA currently meet and are crossing for the so-called death cross.
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Death Cross?
Now I'm not a big figure in that kind of thinking when it comes to trading the death cross, but I know a lot of people are really into it. I don't believe it so much. I think it's normally late, but it is worth noting that some traders will look at this as a sign to start selling. If we do break down from here, the 185 yen level is an area that I think a lot of people will be watching closely as it is a large round and psychologically significant figure, but it's also an area that on longer-term charts does show some promise at being support. If we break down below that level, then 180 yen could be the target. As things stand right now, I think this probably makes more sense as a fade the rally type of situation.
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