Short Sterling, Long Yen Opportunity

  


We have argued that the road to an orderly Brexit remains arduous and that has entered an important technical area ($1.2500-$1.2530). At the same time, we see the dollar as having approached the upper end of its broad trading range against the . One of the important drivers lifting the dollar was the dramatic rise in US yields. We saw that move as countertrend and yields are headed lower again.

GBP/USD

These views could be expressed in a short-sterling, long yen position. The cross posted a key reversal before the weekend by making a new high for the move and then closing below the previous day’s lows. The technical indicators failed to confirm the new high and the RSI (nine-day) has turned lower. The MACDs and Slow Stochastics are poised to turn lower from extreme levels.

Sterling is trading near JPY133.50 as this note is penned. A conservative target is JPY132.15-JPY132.30, but if our analysis is correct, there is potential toward JPY130-JPY131. The JPY134.25 area should provide a nearby cap.

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