GBP/JPY Forecast – British Pound Dips Heading Into the Weekend

GBP/JPY Forecast Video for 10.07.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially pulled back just a bit during the trading session on Friday against the Japanese yen, as we are trying to see some type of profit-taking move. The ¥185 level above continues to be significant resistance, and I do think it takes a certain amount of momentum to finally break above there. Underneath, the ¥180 level will be supportive, with it being a large, round, psychologically significant figure, and an area where there has been some action previously. If we were to break down below the ¥180 level, that would be a very negative turn of events.

All that being said, I do think that eventually the buyers step in and take advantage of the interest rate differential between the United Kingdom and Japan, as the Bank of England continues to fight massive inflation in the United Kingdom, while the Japanese are steadfastly doing everything they can to keep interest rates down, and therefore the loose monetary policy, i.e. quantitative easing, will have a major influence on what happens with the Japanese yen. After all, the Japanese yen is losing value rapidly, and therefore I think we continue to see more of the same in this pair.

Even if we were to break down below the ¥180 level, the 50-Day EMA sits right around the ¥177 level and is rising. We could drop all the way down to that level and still be very much in an uptrend. Longer term, we will have to wait and see how this plays out but it’s obvious to me that the British pound continues to be more attractive than the Japanese yen so I look at this as a one-way trade, therefore there is no point in trying to short this market. Furthermore, we would need to see some type of fundamental shift in attitudes coming from both London and Tokyo to make this change, with special emphasis on Tokyo. After all, even if the British were to suddenly put interest rates on hold, you still get paid to hold this pair on the long side via swap.

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