- The British pound did drop a bit during the trading session on Friday against the Japanese yen to test the 50 day EMA as well as the 200 day EMA indicator. With that being said, the market is likely to continue to see a lot of noisy behavior.
- And I do think this is an area where a lot of people will be watching closely. As long as we can stay above the bottom of the Thursday candlestick, I think we are essentially in the middle of trying to bounce and rally towards the 195 yen level.
- If we were to break down below the bottom of the candlestick from Thursday, then it opens up the possibility of a move to the 190 yen level.
Potential Buyers Coming In
Ultimately, this is a market that I think given enough time will see buyers jumping in to push it to the upside if for no other reason than the fact that the British pound itself is fairly strong. It’s the one currency that has a country behind it that has a trade agreement with the United States. Furthermore, the interest rate differential most certainly favors the British pound. And of course, at the same time,
The Japanese government bond market has seen almost no bids this week. Ultimately, I think it makes sense that traders will be hanging on to this pair in order to collect the swap at the end of the day. That doesn’t necessarily mean that we go straight up in the air, but it does look like we are at least trying to find stability here. And that generally means that we could bounce again in the latest swing higher over the last several months. If we were to clear the 196.50 yen level, then it opens up the possibility of a move all the way to the 200 yen level.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.