Pound/Yen is clearly on the downside today but short term fundamental suggests that the pair might correct more on the upside. We have issued long term short call in pound against Yen, however in the short run prospect is quite high on the upside and risk reward is very attractive.
We expect, recent rally in equities to continue, which would pose significant challenges for Yen bulls. Yen is up today as Bank of Japan (BOJ) didn’t fire any shots but it was widely expected and any reaction to buying over this week’s drop in equities and oil is likely to be short lived.
After quite a long drop from 1.58, Pound is poised for greater correction against popular expectations. We expect Pound to rise on weaker Dollar, post FOMC meetings and Yen to fall victim to equities’ rally. Moreover Yen is now strengthen more than 1000 pips and now finding resistance at key level around 111 against Dollar.
Trade idea
- Buy Pound against Yen at current rate 160.7 and at further dips with stop loss around 159 and target around 165.5 and 169.
