The British pound rallied against the yen on Monday, as the interest rate differential continues to be a major driver.
GBPJPY
The British pound rallied against the Japanese yen after initially gapping lower on Monday as traders continue to push this market to the upside. The 210 yen level below continues to be very important as far as market reactions and market memory is concerned, so I am currently using that as a line in the sand as to whether or not the market is more bullish or bearish.
I do believe at this point we have a scenario where traders are looking at the fact that we are at the 50-day EMA and the interest rate differential as a reason to trade this market. Over the longer term, I believe this is a market that will continue to see plenty of buyers on dips as you do get paid to hang on to this pair, and with this being the case you have to be somewhat bullish.
Monitoring the 215 Yen Level
I don’t like the idea of paying massive swap, so I think this is a pair that continues to be very noisy and quite frankly you do have to keep your position size reasonable. But as you get paid at the end of every day, it will help buffer any type of holding that you have.
The 215 yen level would be an area that I think a lot of you will be watching as it was a recent swing high in February and a break above there really could send this pair flying. Furthermore, you have to keep in mind that the Japanese yen is near 1990 lows against the US dollar, so I anticipate all of this would probably play out at the same time. If this pair breaks above the 211.50 yen level, then I could be convinced to possibly start going long from there, or a pullback closer to the 210 yen level would have me interested as well on the first signs of support.
Potential signal: I am buying at 211.50 with a stop of 100 pips. I would aim for 213.25 above.