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Pound/yen is getting very close to the all time low recorded in January 2009. The recent drop in the pound against the dollar is the main reason for this fall.

Will break lower and dive? Or recover from here? A lot depends on Bernanke.

Pound Weakness, Yen Stability

GBP/USD dropped earlier below 1.56. This came after the meeting minutes released by the Bank of England have shown that the MPC is seriously considering another round of quantitative easing, or QE, or pound printing if you wish.

Only one member voted for an immediate move (Adam Posen), but another one already said publicly that this is an option. Also the British Chancellor of the Exchequer, George Osborne, hinted that he would like to see monetary stimulus.

The impression of the market is that more easing will likely occur in November, and perhaps even in October. More pounds in the market mean a lower value for the pound.

On the other side of the pair, the Japanese yet is trading at a much narrower range against the greenback. The general notion is that the BOJ will intervene if USD/JPY falls below 76 once again, although its influence is very limited, as we’ve seen in the past. The range is very limited at the moment.

GBP/JPY awaits Bernanke

The Federal Reserve will release its all important statement soon. It is expected to announce  a few new easing measures in the US, a move that will likely help the pound and weaken the yen.

But it is important to remember that Fed action is partially priced in.  So, if Bernanke doesn’t deliver a big bang, the markets might get disappointed and go for the dollar and the yen (safe havens), selling the pound, euro and other “risky” assets.

In any case, a big move is likely in “the dragon”.

GBP/JPY now trades at 119.30, only 40 pips above the record low of 118.90. It already dipped to 119.10 and managed to bounce back for now. 119.50 is the first line of resistance, although more serious resistance is at 120.07.

For more lines, see the recent GBP/JPY technical analysis on BO Crunch.

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