Why Has GBPJPY Gone From 124-200+?

24 giu 2024

GBPJPY is another example of the extent to which the Japanese Yen has been extremely weakened.

A weak currency is beneficial for an economy that exports a lot by nature, but it only goes so far. Once you have seen extreme de-valuation, it becomes necessary to create a change of direction.

This is usually done by anything that will prop up the currency (Intervention, Monetary policy, Other CB implementations).

Because the divergence in Monetary Policy has been sustained, and still is sustained between the BOE and BOJ, you get the persistent rallying.

Until there is a change where the GBP is less favoured and in less demand, you will get a continuation.

That is why in light of these moves you have to adjust your strategy if you want to catch the falls that occur. Knowing that momentum is continuing and where it's likely to end gives you an idea of where you may short.

This change is likely because major economies (except JPY) want to bring their rates down because they have been so high for so long. Japan isn't in that scenario and has a different case to other major economies, again, hence the big divergence in price.

So it would require a reason for de-vestment of GBP and investment of JPY. This would only really occur if the prospect of returns looked for favourable on Yen investment, which would mean you would need a higher rate.

There is no incentive to buy JPY instead of GBP. Think about it yourself, if you had the option of two investments, one yielding a far higher return, which would you pick? This is the best way to understand the situation.

24 giu 2024

Nota

Any shorts can await fundamental bias and/or just be incredibly small.