GBP/JPY Forecast Today 07/02: Drops On Boe Cut (Video)

(MENAFN- Daily Forex)

• It's been pretty ugly here on Thursday as the British Pound has fallen pretty significantly after the Bank of England cut interest rates by 25 basis points.
• What really got the markets moving, I think, was the fact that a couple of members actually wanted to cut further. So what does this mean?
• Well, it means that the British Pound is going to continue to face headwinds as the Bank of England is almost certainly cutting further into the future.

Now, that being the case, you also have to keep in mind that the Japanese have recently started complaining about inflation and how they may have to raise rates. That probably happens to a point. Now, where do we cross? We don't really know how long it'll take for a crossing of interest rates if it ever happens. I mean, we'd have to go pretty far. But as there is less and less power in the idea of a carry trade, meaning that you're not getting paid as much at the end of every day. It gets a little less attractive for traders.

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So, I'm watching the 188 yen level because if we break down below there, we could make a new lower low, but we also could drop all the way down to 184 yen. I think this would need to be in congruence with the yen strengthening everywhere else, which it has been doing as of late. If we start to see the perfect storm of the yen rising and the British pound falling against multiple other currencies, that's what will kick this off. Rallies at this point in time, I'm not as thrilled about, although breaking above the 191 yen level would make a statement. But if the yen starts giving up that kind of strength, I'm actually going to prefer to buy dollars against the yen after what I just read from the Bank of England.

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