The British pound has rallied a bit against the Japanese yen during trading on Wednesday, as we continue to see the case for a “risk on rally” around the world. The stock markets in the United States have been rallying, and as the Americans take the ball it’s very likely that we will continue to see this grind higher. However, there have been Twitter comments about the European Union trying to play hardball with the City of London involving the rewrite of MiFID. Unfortunately for the European Union, the British are more than likely going to have something akin to a free trade deal with the United States, which is a much larger market. In other words, the initial reaction to this Twitter spat was probably something along the lines of machine trading.
GBP/JPY Video 06.02.20
There are 11 months ago, so the short term panic move should provide buying opportunities for those who are willing to sit through the volatility. Ultimately, the market has been building pressure to the upside for some time, and therefore there’s no reason to try to fight that overall trend. The ¥148 level remains my target longer-term, as it was the most recent high. Getting there may be a very noisy affair, but ultimately it is very likely to be what happens. That being said, I also see the ¥139 level underneath as massive support, so I more than willing to look it dips as buying opportunities. With that being the case, the market is likely to continue to have a “buy on the dips” mentality going forward.
Please let us know what you think in the comments below