The British pound has had a wild ride against the Japanese yen during the trading session on Thursday, as the Bank of England had a meeting, thereby having a lot of high-frequency traders jumping in on every word of the statement. As the Bank of England failed to add stimulus, the British pound shot straight up in the air, but it should also be noted that during the press conference they suggested that more stimulus definitely is coming in June, leaving the door wide open for that. In fact, it seems almost assured that they will be gobbling up more gilts, so with that in mind it is essentially quantitative easing.
GBP/JPY Video 08.05.20
Markets are forward-looking, so they started selling off the British pound at that point. As we had broken down below the ¥132 level, the market looks as if we are going to go down to the ¥130 level, an area that will attract a significant amount of attention, followed by the ¥128 level. As far as the upside is concerned, we could go back into the previous consolidation area, but the 50 day EMA is likely to continue to go downward, and it could offer a significant amount of pressure. Quite frankly, I have no interest whatsoever in buying this pair, because the British economy is a mess, and of course the Japanese yen is considered to be a safety currency, something that is very desirable in this environment. Being patient and fading rallies will probably be the best trade.
This article was originally posted on FX Empire