GBP/JPY Forecast – British Pound Looking Overstretched

GBP/JPY Forecast Video for 03.05.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially tried to rally during the trading session on Tuesday against the Japanese yen but has given back quite a bit of the gains to show signs of hesitation. That’s not a huge surprise considering just how overextended the market is at the moment, and of course we are at a major resistance barrier in the form of a previous high. That’s an area of course that will be difficult to get above, but not impossible. I think it’s probably only a matter of time before we take off to the upside, perhaps pulling back initially to find some type of value.

Keep in mind that the British pound has been very strong due to the fact that inflation in the United Kingdom is so strong, and therefore it makes quite a bit of sense that this market would continue to go higher as the Bank of Japan continues its yield curve control policy, forcing interest rates in the 10 year Japanese bond to offer 50 basis points or less. Contrast that with a high inflationary environment in the United Kingdom, and it’s no surprise that we have been going higher for a while.

At this point, I like the idea of buying short-term pullbacks to take advantage of value in this market, and I do think that we will eventually get that opportunity. The ¥170 level could be an area where we would see buyers come in and try to pick up a bit of value, as it is a large, round, psychologically significant figure. After that, we could be looking at the ¥168 level, which was a previous resistance and should have a significant amount of support attached to it due to market memory.

All things being equal, I do not have any interest in shorting this pair, it’s obviously too strong, and the Japanese yen has far too much working against it at the moment. With this, I think you are simply looking for value to get involved with, or some type of massive breakout above the ¥173 level, which could open up and move all the way to the ¥175 level.

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