The British pound continues to rise against the Japanese yen overall, as we continue to see the carry trade play out. With this being the case, the pair is a favorite at the moment, although we are a touch overbought.
GBP/JPY
The British pound has shown itself to be somewhat stagnant during the trading session here on Thursday as we had sold off on Wednesday and now we are stabilizing. The interest rate differential still favors the British pound significantly over the Japanese yen as we have so much in the way of a wide spacing between the two central banks. It does make sense that buyers will continue to be buyers of the pound as you get paid to hang on to it at the end of every session.
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That being said, somewhere near the 218.50 yen level, we have that massive supply when the Bank of Japan and the Treasury Department in the United States intervene to help protect the Japanese yen. That being said though, the swap at the end of every day is very healthy and it opens up the possibility of finding a short-term pullback near the 50-day EMA could offer value right around that 215 yen level. This is an area that I will be very interested in getting involved in, given the chance.
We also have support to the upside. I do think that we probably eventually try to get to the 220 yen level, but the 220 yen level has been difficult in the past as well. This will have a lot to do with the Japanese and not so much to do with the British pound, which although it is a little exhausted, overall, right now the reality is that the interest rates in Great Britain will continue to be extraordinarily high in comparison to the Japanese.
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