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Continues to Find Upward Pressure

All things being equal, there’s nothing on this chart that looks negative to me, and I would point out that we have a huge “W pattern” forming right now.

  • The GBP/JPY initially pulled back just a bit during the trading session on Thursday to reach down to the ¥160 level, showing signs of weakness, but then turned around from that large number to show just how tenacious this market is turning out to be.
  • Ultimately, I think this is a situation where we will continue to see a lot of noise more than anything else, but at this point in time, it’s obvious that there are plenty of buyers willing to step into this market.
  • If we can clear the ¥162.50 level, which is where the 50-Day EMA and the 200-Day EMA currently reside, then I think the market takes off toward the ¥166 level.

The yen is a popular asset during turbulent times.

Pullbacks at this point should be bought into, especially if interest rates around the world continue to be relatively elevated because the Japanese will have to do everything, they can keep the 10-year yields at 50 basis points or lower. Ultimately, the market is likely to continue to see the Japanese yen struggle because the Bank of Japan will do everything, it can to make that target stick, meaning it will be buying all of those bonds, in other words printing more Japanese yen, which is exactly what happened all of last year that sent this market is high as it went.

Market to be Influenced by Bond Markets

All things being equal, there’s nothing on this chart that looks negative to me, and I would point out that we have a huge “W pattern” forming right now. Breaking above the ¥162.50 level kicks that off, and then we have a potential “measured move” that reaches all the way to the ¥169 level. Granted, I don’t think we get there overnight, and of course, we have a lot of previous selling pressure that we would have to chew through to make that happen, but it is something worth paying attention to.

Ultimately, this is a market that will continue to be heavily influenced by the bond markets, so you will have to keep an eye on what’s going on in yields in both the United Kingdom, Japan, and for that matter, the United States as it will leave the rest of the world. Higher yields mean weaker Japanese yen at this point, and the Bank of Japan is willing to print as much as it needs.


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