Created on August 04, 2025

• The British pound collapsed pretty significantly against the Japanese yen during the trading session on Friday, slicing through the crucial ¥198 level, an area that short-term traders have been watching very closely.
• Because of this, I think it suggests that perhaps market participants are going more “risk off”, as the Japanese yen is considered to be a safety currency.

Technical Analysis

The technical analysis for this pair is obviously in a state of flux as we just printed a massive red candlestick. A nasty red candlestick for the trading session on Friday might be enough to entice buyers, but quite frankly I think it’s asking a lot for markets to suddenly turn around. It’s very possible that the British pound could drop to the 200 Day EMA which is at the ¥194.23 level, before bouncing again. It’ll be interesting to see if that actually plays out, but I also recognize that a lot of this comes down to risk appetite overall.

The ¥198 level above probably ends up being a major barrier, but if we can break above there then we will threaten the ¥200 level again. Keep in mind that the area in the 200 point range has been resistant a couple of times in the past, so one has to ask questions as to whether or not we just found the top of a longer-term consolidation area that might hold. If we break down below the 200 Day EMA, we could very well see this market drop down to the ¥187.50 level, maybe even as low as the ¥184.50 level. This will almost certainly have everything to do with risk appetite and the overall attitude of markets in general. After all, there are a lot of different things going on at the same time, and this does have a lot of traders somewhat concerned. Ultimately, I think we’ve got a situation where traders are looking at this through the prism of a wondering whether or not the markets are about to see a major shift in attitude.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.