FxWirePro Long Term Outlook: Prepare to go for another big short in pound against yen

After our previous call back in February, named, “FxWirePro: Long-term outlook – Pound might drop to 121 against Yen” available at http://www.econotimes.com/, where we suggested going short in pound against the yen at 168 with a target around 121, reached our target back in October (almost, pound reached 124.7 against the yen), we are ready to go for another long term call in the pound/yen.

Recently, the pound has benefited from the High Court’s decision that the government would have to seek approval of the parliament for triggering Article 50 of the Lisbon Treaty, while yen has dropped amid a stronger dollar, lack of risk aversion and as 1-year USD/JPY basis swap reached the highest level since 2008 financial crisis.

Due to change in fundamentals, GBP/JPY rose for eight consecutive weeks (including current), which is the highest since June last year, when it rose for 11 consecutive weeks. However, we suspect the tide to change once more as the fundamental risks that await the pound is extreme in nature. We are getting ready to once again call a short in the pound against yen, with a stop loss around 160 and target probably beyond 100 on the downside. We suspect the 150 area would become appropriate to trigger fresh shorts. However, as of now, we are waiting at the sideline and closely monitoring the exchange rate.