GBP/JPY Forecast – British Pound Continues to Show Signs of Hesitation

GBP/JPY Forecast Video for 02.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound has gone back and forth during the trading session on Wednesday, as we continue to see a lot of volatility and noisy behavior. We reached down toward the ¥163 level, and then bounced back from this massive selloff. At this point, we are fighting a shooting star from the previous session, which pierced the ¥165 level. This pullback has offered a little bit of a reprieve for the Japanese yen, but it looks like we are ready to turn things back right around.

If we do break down below the ¥162.50 level, we will be approaching the 200-Day EMA, which is also where the 50-Day EMA sits underneath, as it looks like we are trying to form the so-called “golden cross.” The shooting star from the Tuesday session was a major exhaustion signal, which is not a huge surprise considering that we reached the top of that major selloff candlestick back in December. It was never going to be easy to get above there, so it does make a certain amount of sense that we have seen this happen.

The market very well could be noisy and choppy between now and the end of the week, but I do think given enough time we will probably see buyers come back into this market, especially as there was such a massive amount of resistance in the ¥162.50 level, which should now offer a little bit of a floor. Furthermore, the Japanese yen continues to suffer at the hands of the Bank of Japan and its yield curve control, keeping the 10 year note down to 50 basis points. In order to do that, they must print unlimited yen at times in order to buy unlimited bonds.

As they are the only central bank in the world of consequence that is in a quantitative easing mode, it makes the Japanese yen a currency that is quite easy to short for most traders. The British pound of course has had the boost due to the fact that the Windsor Agreement came to fruition, allowing the movement of goods and services across the northern Irish border with the EU.

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