GBP/JPY Forecast – British Pound Breaks Above Previous Hammer

GBP/JPY Forecast Video for 15.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound has rallied a bit during the trading session on Tuesday as we continue to see a lot of significant volatility. The market broke above the hammer from the previous session, so it does look like we are going to try to power higher from here. That being said, there’s also an inverted hammer that reaches all the way to the ¥164 level, so it’s difficult to imagine a scenario where we simply take off to the upside. Furthermore, the ¥165 level above has proven itself to be an important ceiling, so even though I think this market looks relatively bullish, it’s got a lot of work to do to finally break out to the upside.

If we were to turn around and break down below the 50-Day EMA and the 200-Day EMA, then it’s possible that we could drop to the ¥160 level. That’s where the hammer from the Tuesday session bounced from, showing signs of significant support. It does make a certain amount of sense, as it is a large, round, psychologically significant figure, and an area that has been important multiple times in the past. Recently though, we have seen this market chop through it a couple of different times, so at the end of the day it does make a certain amount of sense that it could eventually lose its efficacy.

Keep in mind the Bank of Japan continues to fight interest rates, so if interest rates around the world rise, they have to print more Japanese Yen to keep the 10 year JGB underneath 50 basis points. This is exactly what kicked off last year’s rally against the yen in almost all currency pairs was based upon this exact fact. In other words, if the market continues to see interest rates rise, there’s almost no way that the Japanese Yen doesn’t get hammered against multiple pairs. Inflation is still very high, despite the fact that there was a lot of noise about the Federal Reserve possibly bailing everybody out after the bailout of Silicon Valley Bank in America. At the end of the day, inflation will still prove itself to be very resilient and therefore the Japanese yen will continue to struggle.

For a look at all of today’s economic events, check out our economic calendar.