• The British pound has rallied significantly during the trading session on Wednesday as we continue to see the Japanese yen get hammered.
• The market continues to see a line of upward pressure, and the Japanese yen and its low interest rate will continue to be sold off over the longer term.

The massive sell off that we had seen during the previous session on Tuesday suggests that there was some fear coming into the market, but we have seen the market turn back around. At this point, the ¥200 level is obviously in focus, and I think the ¥200 level has a lot of psychology attached to it. Whether or not it is going to be the be all, end all of resistance remains to be seen.

I don't think that's the case. And I also recognize that the Bank of Japan can only do so much. The interest rates have to stay low in that country because of the massive debt. They are in a debt spiral and have been for years. So, with that being said, I do think the dips continue to be bought into.

Upside Continues to Be the Right Side

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And I do think eventually we break out to the upside. Breaking out to the upside opens up the possibility of a much longer move to the upside, perhaps to the ¥205 level and beyond. Because I think this is a structural trend we would need to see some type of complete turnaround by the British to change the attitude of this market. Or this is a much less likely a complete turnaround by the Japanese. Because of this, I remain bullish, and I also recognize that you can hang on to this trade and get paid at the end of the day.

Ultimately, GBP/JPY is a pair that I have no interest in trying to short, because I don’t want to pay for the privilege of trying to “swim upstream.” With this, I remain a buyer of dips and I continue to hold a core position in this pair.

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