GBP/JPY Forecast – British Pound Bounces After Initial Selloff

GBP/JPY Forecast Video for 27.02.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially fallen during the trading session on Friday to reach the 50-Day EMA, plunging below the 200-Day EMA. That being said, the market has turned around quite significantly to show signs of life. Now that we are back above both of these moving averages, it looks like the ¥162.50 level is a little bit of a magnet for price. That being said, the market had recently broken out, and now has pulled back only to find buyers again. This is a classic technical analysis set up so I believe that a lot of traders out there will be paying close attention to this market.

When I look at the chart, the most obvious target would be the ¥165 level. It may take a little while to get there, quite frankly as long as the Bank of Japan continues to fight higher interest rates, the Japanese yen will be very weak. The rest of the world is in a major tightening cycle, while the Bank of Japan continues to do quantitative easing, trying to defend the 50 basis points level on their 10 year notes. They are the only major central bank doing so, so the Japanese yen will continue to be a bit of a punching bag.

On the other side of the equation, you have the British pound which has seen some strength in general, so it’s not you surprise it is doing well against the yen. As long as we continue to see inflation in the United Kingdom, that will probably give a little bit of a boost for Sterling overall, especially against extraordinarily weak currencies like this one.

Nonetheless, this is probably more about the Japanese yen than anything else, so pay attention to what the Japanese yen is doing against currencies around the world, because it tends to move in the same general direction, regardless of whatever currency you are measuring it against. I have no interest in selling this pair, at least not until we break down below the ¥160 level, something that is quite a distance from where we are trading currently. Buying on the dips will continue to be the way going forward on short-term charts.

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