GBP/JPY Forecast – British Pound Continues to Form a Base

GBP/JPY Forecast Video for 28.12.22

British Pound vs Japanese Yen Technical Analysis

The British pound has rallied a bit against the Japanese yen during the trading session on Tuesday, as traders are starting to head back to work, at least the junior traders on the desks. The markets continue to see a lot of noisy behavior, as people are trying to figure out where the next direction is going to be after all, we are between two major holidays, so therefore a lot of indecision will be part of the game. Furthermore, we will not have a lot of volume, so it does set up for potentially explosive moves on unexpected noise.

If we break down below the lows of the candlestick from last Tuesday, breaking below the ¥158.50 level, it’s very likely that we would have some issues going forward. In that scenario, I suspect that the British pound will fall apart, looking to drop down to the ¥155 level really quick. In that scenario, it’s probably going to be a major “risk off” type of event. Keep in mind that the Bank of Japan has recently changed its stance on yield curve control, allowing the 10 year note to go as high as 50 basis points.

However, the bond market has already decided to test that area, so the question now becomes whether or not the Japanese yen can continue to strengthen? I suspect that this will be a short-lived victory for the yen, at least until the Bank of Japan completely gives up this idea. At this point, I believe that we probably get a short-term rally, but I also recognize of the 200-Day EMA sits right around the 163 in level and is going to be significant resistance.

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