- The British pound has rallied against the Japanese yen yet again on Wednesday, as it looks like the ¥193 level continues on for a lot of resistance.
- If we can break above there and then, I think it's likely that the market could go looking to the ¥195 level. This is a psychological area of resistance, and there is probably a situation where some profit taking will take place.
Short term pullbacks continue to be buying opportunities. And this makes a lot of sense, considering that the Bank of Japan had recently raise interest rates to 0%. Furthermore, the United Kingdom has quite a bit of inflation and therefore interest rates will stay elevated. But beyond that, you get paid to hang on to this pair. Wednesday is triple swap, so that is yet another reason to think that this market continues to go higher.
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Underneath the 50 day EMA has the ¥190 level offering support as well. Short term pullbacks can continue to find plenty of buyers as again, you get paid to hang on to this pair, the trend is higher and although the Bank of Japan has complained multiple times, they don't really have the wherewithal to fight this type of trend. They simply can't do it, and the market knows all of this. The market will continue to look at getting paid in the end, and as we have such a great carry trade situation.
So, with that being the case, the best they can do is slow things down. The 50 day EMA has acted like a very strong trendline on the way higher, and therefore you have to assume that it will continue to behave as such. I believe at this point in time that the Japanese yen is going to fall on really hard times, and the British pound, of course, is one of the higher paying swaps that you get against this currency. Furthermore, you are likely to see a lot of upward pressure in all of the XXX/JPY pairs, including here.
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