GBP/JPY Forecast – British Pound Plunges Against Japanese Yen

GBP/JPY Forecast Video for 27.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound has plunged against the Japanese yen during the trading session, as Friday ended up being rather negative. The risk appetite parameter of the market seems to be one of negativity, and therefore it does make a certain amount of sense that the Japanese yen does better than the British pound. Furthermore, you need to keep in mind that the Bank of Japan continues its yield curve control, and therefore it is worth noting that the bond markets are a huge influence on what happens next.

Remember that the Bank of Japan is trying to keep the 10 year JGB yield down to 50 basis points, and by doing so they are distorting the markets much like the other central banks had been doing for so long. The only way they can fight rising interest rates is to buy bonds. In order to buy bonds, they have to print yen, thereby flooding the market with currency. In that situation, you have the simple supply/demand equation being distorted, and therefore if the Bank of Japan is flooding the market, then you see the yen lose value. However, as of late we have seen the interest rates around the world drop, so that of course makes it release some of the pressure on the Japanese yen, and we have seen several currencies around the world fall against it.

At the same time, if people are concerned about global risks, they buy bonds, thereby driving down rates. In other words, it’s a bit of a feedback loop, and therefore it makes sense that we have seen the pound fall, as there are so many concerns out there. That being said, there is a lot of structural support underneath, especially near the ¥157.50 level, so I do think that the downside is somewhat limited. In other words, although we have fallen rather drastically and Friday, it’s worth noting that there have been buyers down in this area previously. The fact that we have been so drastically supportive, leads me to believe that this pair will eventually bounce, perhaps back above the ¥160 level. Will I be a longer-term buy-and-hold type of trader? No of course not, but I think range bound trading is still possible.

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