The British pound started off strong in trading on Tuesday, breaking above the important ¥200 level. However, it has since given back some of those gains, indicating that there will be a lot of volatility in this market.
Despite this, I believe that market participants will continue to push the pound higher, and I see any dips as opportunities to buy. The interest rate difference between the pound and the yen is significant, which I think will drive the pound even higher, possibly breaking above ¥201.
While there may be a short-term pullback, I view it as a chance to capitalize. The market is showing signs of trying to surpass the Bank of Japan’s intervention, although the ¥197.50 level has proven to be a strong resistance in the past.
Institutional traders are interested in holding onto positions that pay daily, and with the 50-day EMA providing support around 196.25, I believe there are plenty of support levels below. I expect value hunters to enter the market soon.
Despite an upcoming Bank of Japan meeting, I don’t think they can do much given Japan’s high debt levels. I remain bullish on the pound against the yen for the long term and anticipate breaking through recent highs. I have no intention of selling this pair, as I foresee the pound continuing to strengthen against the yen.