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The British Pound appears poised to continue to rise against the Japanese Yen after prices cleared resistance marked by a falling trend line set from January 2 and the 23.6% Fibonacci expansion. Buyers now aim to challenge the 38.2% Fib at 171.87, with a break above that targeting the 50% level at 172.81. Alternatively, a move back below the 23.6% expansion at 170.70 eyes the March 3 lowat 168.81.
A long position targeting 171.87 with a stop on a daily close below 170.70 can be justified from a risk/reward perspective assuming an entry price no higher than 171.28. We will pass on the opportunity however. The pair is highly correlated to the S&P 500 (0.73 on 20-day percent-change studies) and signs of vulnerability in the benchmark index’s positioning warn against betting on upside follow-through.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com