GBP/JPY Forecast – British Pound Breaks Back Above ¥170

GBP/JPY Forecast Video for 16.05.23

British Pound vs Japanese Yen Technical Analysis

The British pound has rallied rather significantly during the trading session on Monday, as we have broken above the ¥170 level again. At this point, it looks like the market is really starting to pick up momentum, and the question now is whether or not we can break the recent highs. If we can, then it’s likely that the market could continue to go looking toward the ¥125 level. Underneath, the ¥168 level should offer support, and therefore this market is more or less going to be a “buy on the dips” scenario.

The Japanese yen has suffered at the hands of the Bank of Japan, as it continues to do yield curve control. Yield curve control means that the Bank of Japan is doing everything it can to keep interest rates on the 10-year JGB down to 50 basis points. In order to do this, they have to print more Japanese yen, and this of course floods the market with supply. In that scenario, it’s difficult for the Japanese yen to retain its value, and therefore we have seen the Japanese yen get hammered for the last year against almost every other currency.

By contrast, the British pound has been strengthening due to the Bank of England and its tight monetary policy, as the United Kingdom continues the face inflation. In this environment, it does make quite a bit of sense that the GBP/JPY pair continues to rally from here.

Underneath, the 50-Day EMA sits just below the ¥166 level, and is rising. The ¥166 level is an area that will attract a lot of attention, and then of course the ¥165 level underneath would be very important as it is a large, round, psychologically significant figure, and an area where we have seen structural support previously. If we were to break down below there, then the market more likely than not falls apart. Otherwise, it continues to be a situation where plenty of buyers will continue to come back into the picture and try to pick up “cheap British pounds” and take advantage of the overall weakness of the Japanese yen in general and therefore that’s probably the focus more than anything else.

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