The British pound has been very active and very noisy against the Japanese yen during trading on Thursday as we continue to hang around the 210-yen level.
All things being equal, this is a market that I think continues to see a lot of volatility based on the idea that quite frankly, we just don't have a lot of clarity when it comes to risk appetite.
Keep in mind that this pair is highly sensitive to risk appetite, and of course the British pound itself has a much higher interest rate than the Japanese yen, so we need good news to get this going to the upside significantly. As far as the interest rate differential is concerned, yes, it is a market that pays you to hang onto it, but ultimately I think you have a scenario where people are just simply not sure what to do and if that's going to be the case, then it's likely that it is very difficult to put a lot of money into this market.
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Technical Support and Upside Potential
A short-term pullback from here opens up the possibility of a drop down to the 208-yen level. Breaking below the 208-yen level opens up the possibility of a move down to the 205-yen level where the 200-day EMA currently sits.
If we turn around and break above the 212-yen level, then it would be very risk-on type of appetite opening up the possibility to a move to the 215-yen level. Ultimately this is a market that I think will be very volatile, very difficult, but given enough time should go higher based on risk appetite returning and of course interest rate differential, but in the meantime, we will get these sudden moves that drop the market only to turn around and see it whip straight back to the other.
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