GBP/JPY Forecast – British Pound Finds Buyers on the Dip

GBP/JPY Forecast Video for 28.08.23

British Pound vs Japanese Yen Technical Analysis

The British pound initially fell during the trading session on Friday, but turned around to show signs of life again. By doing so, the market looks as if it is trying to get back to the ¥185 level, an area that is a large, round, psychologically significant figure. If we were to break above the top of the previous candlestick, it opens up the possibility of a move to the ¥186.50 level. On the other hand, if we were to break down below the bottom of the candlestick on Friday, then we could see a move toward the 50-Day EMA underneath, which is sitting around the ¥181.50 level.

That being said, the British pound continues to enjoy more demand than the Japanese yen as the interest rate differential between the 2 economies is wide enough to drive a freight train through. All things being equal, this is a market that I think eventually will break above the ¥185 level, and go looking to much higher levels. If that’s going to be the case, I think this ends up being a nice buying opportunity but with all of the uncertainty out there, you need to be cautious with your position sizing. In this environment, things could get rather ugly, and therefore you need to make sure that you take your time building up a position, but recognizes the fact that once momentum comes back into the market and traders are back from summer holiday, the thing could get moving rather quickly.

Until the Bank of Japan changes its overall attitude, I just do not see a situation where the Japanese yen picks up any significant strength, at least for any significant amount of time. With that being the case, you have to look at this through the prism of finding value as it occurs, and then just simply taking advantage of it. The overall interest rate differential between the 2 currencies will continue to be the major driver of where we go next, as traders get paid to hang on to this position over the longer term. Shorting isn’t a possibility until we break down below ¥180 at the very least.

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