- Libra extends losses against a stronger yen and proves support in 198.25
- The Aversal Risk Market after Trump’s new tariff threats is weighing on the torque.
- Below 198.25, the pair could extend the losses to the 196.80 area.
The pound is correcting down the maximum of last week, just below the psychological level of 200.00, with the bassists testing the support in the area around the previous maximums, in the region of 198.30-198.40 at the time of writing.
The feeling of the market is negative, since Trump’s latest tariff threats to the euro zone and Mexico have added uncertainty to global commercial perspectives. The market reaction has been moderate, but a slight risk aversion continues to press the pound, supporting the Yen as a safe refuge.
Technical analysis: in a bassist correction within a broader bullish trend
The immediate trend of the GBP/JPY is slightly negative, with the price action by lowering from the maximum of 299.85 of July 9, and the lowest maximum in 199.45 giving new hopes to the bassists. The RSI has crossed to negative territory below 50, with bassists eroding the 198.25 support area.
The broader trend remains bullish, with the torque operating within an ascending channel since the minimums of early May, but, in the current context, additional correction should not be ruled out.
A confirmation below the minimum of Friday, in 198.25, would find support in the minimum of July 7, which crosses the lower part of the ascending channel, in the 196.80 area. On the positive side, the maximums of 199.45 and 199.85 of July 11 and 10, respectively, close the way to the upper part of the channel, now in 200.40.
Feeling Risk – Frequently Questions
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
