The British Pound has rallied against the Japanese yen on Wednesday, as the markets continue to see a lot of risk appetite questions appearing.
GBPJPY
This is Christopher Lewis taking a look at the British Pound against the Japanese Yen. The British Pound has rallied quite nicely during the trading session here on Wednesday as we have broken to the upside and it now looks very much like a market that is going to do everything it can to reach the 215 Yen level.
If we get above there, then we could really start to see this market go much higher. All things being equal, short-term pullbacks are buying opportunities as the 212 Yen level acts as support. But keep in mind we have a lot of support underneath there as well, including the 50-day EMA and the 210 Yen level.
Central Bank Divergence
Ultimately, I think you also have to keep in mind that the two central banks are in focus here with the fact that the British will be in a situation where the Bank of England may not be able to cut rates as quickly as possible if we do in fact get some type of energy inflation shock to that economy.
On the other hand, you have the Bank of Japan, which quite frankly is in a situation where it cannot do much with rates. We are on the precipice of the Japanese Yen getting absolutely annihilated by most currencies and pressuring, at least against the Dollar off the top of my head I believe, a swing high from 1990.
The Yen is in serious trouble. The interest rate differential continues to pay you at the end of every day and therefore it does make the Pound much more attractive than the Japanese Yen. So, I do think we will go higher. Short-term pullbacks could be a thing based on risk-off type of behavior, but over the longer term, I think we go much higher.