The British pound has initially dropped against the Japanese yen, as the markets are trying to determine what risk appetite is going to be as we are dealing with a major war now.
GBP/JPY
The British pound has initially sunk against the Japanese yen, but it looks like we are starting to see a pushback against negativity as the panic seems to be subsiding a little bit. Keep in mind that the 50-day EMA sits right around the 210 level and that is something worth watching very closely.
If we continue to see buyers come in and pick up cheap British pounds, that could push this pair towards the 215-yen level. Keep in mind that the Japanese have a major problem with debt and will not be able to keep interest rates higher anytime soon, not to mention raising them.
Monetary Policy and Technical Support Levels
The Bank of England remains somewhat hawkish and dovish at the same time, but their rate of interest rate cuts is going to be very slow. All things being equal, this is a market where I think if we drop, there will be value hunters as long as we can stay above the 208-yen level.
If we were to break down below the 208-yen level, then it opens up the possibility of a move down to the 205-yen level where the 200-day EMA is as well. Ultimately, I think this is a market that could go looking at the 215-yen level above, which was a recent swing high.
Ultimately, I think the interest rate differential continues to pay traders and I am comfortable going long here, but I also recognize that the risk appetite will be all over the place. With this being the case, the markets continue to be a dangerous place to risk a ton of money.