- The British pound has rallied again during the trading session on Monday, as we have shown quite a bit of strength in this pair yet again.
- We are well above the ¥195 level, which of course is psychologically important, and it’s probably worth noting that we broke above the inverted hammer a couple of weeks ago, which is also a very bullish sign.
Bank of Japan Helpless
Although the Bank of Japan has recently intervened, the reality is that they cannot do anything to say the Japanese yen at this moment. Quite frankly, the interest rate differential between most currencies in the Japanese yen continues to be wide enough to drive a truck through, and then of course you have to worry about the repayment of debt coming out of Japan. They are simply far too indebted to have strong interest rates, so at this point in time the only thing that the Japanese can do is occasionally intervened to slow down the destruction of their currency.
With all that being said, this is a market that I think continues to be “buy on the dips”, and of course I have been adding all along. Underneath, the 50-Day EMA offer support, and quite frankly has been like a perfect trendline for some time. Underneath that, then you have the ¥190 level offering support as well. Regardless, I think it’s more likely than not that we go looking to the ¥200 level, which is an area that causes quite a bit of disruption the last time, but again it had to do with the Bank of Japan intervening, and not necessarily any shift in attitude. The ¥200 level of course has a certain amount of psychology attached to, but at the end of the day is yet another round number that the market will eventually blow through.
I have no interest whatsoever in trying to short any yen denominated pair, because quite frankly I don’t want to pay for the privilege at the end of every day. Ultimately, the Japanese have a major problem on their hands and I don’t know that there’s a whole lot they can do about it.
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