The British pound initially tried to rally during the trading session on Wednesday but gave back the gains to reach down towards the 50 day EMA. The pair is highly sensitive to risk appetite so that should not be a huge surprise that we have seen a lot of noise going back and forth. The coronavirus continues to take the headlines back and forth, but we also have the other part of the equation involving the British pound and the negotiations between the UK and the EU.
GBP/JPY Video 27.02.20
All things being equal, you can take a look at this market and see that we are in a bit of a consolidation area between the ¥145 level and the ¥141 level underneath. At this point, we are essentially in the middle of the range, so it’s a bit of a “50-50” type of situation here. I do believe in the longer-term uptrend, but I also recognize that there are a lot of concerns out there when it comes to global growth.
The Japanese yen however has been facing significant pressure, due to the fact that the Japanese economy looks very likely to enter a recession at this point in time, and of course the coronavirus spreading into Japan itself is not going to help the situation either, so at this point it’s very likely that we continue to see the Japanese yen underperform as a “safety currency.” All things being equal, I think that the market is simply going back and forth but building a bit of a base to go higher longer term.