Potential signal
I am a buyer at an hourly close above 216, with a stop at 214.
I would aim for 220.
The British pound continues to threaten the Japanese yen on Thursday as we are pressuring the 216 yen level. This coincides with the Japanese yen weakness that we see across the board against multiple currencies as the carry trade could very well end up being a very big theme in the forex markets.
The British pound obviously has a much higher interest rate attached to it than the Japanese yen and with the Bank of Japan seemingly not able to do anything about tightening monetary policy, at least not in any significant manner, it does make a certain amount of sense that this pair does eventually break out to the upside.
The Carry Trade Dynamics
That being said, the shooting star from the Wednesday session is a negative sign, but we're just hanging out right below the 216 yen level. This reminds me of the old comparison to a beach ball being held underwater; if it does in fact break the surface, it could shoot straight up in the air.
Alternatively, we could pull back, and I'd be very interested in buying this pair at the 214 yen level because it's an area that previously had been resistant and it would just be a nice short-term pullback in what is a very strong uptrend in general.
Top Regulated Brokers
The Japanese yen is a currency that I do not wish to own, and I certainly wouldn't own it against the British pound or really pretty much any other currency that I can think of, but specifically against the British pound as this is such a favorite carry trade type of position.
London finds itself in the scenario where energy costs are probably going to keep inflation high, so it's going to be difficult for the Bank of England to start loosening rates with any meaning. At this point, I think Japan will suffer at the hands of the interest rate differential around the world. This is just one of many pairs that I like to.
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