GBP/JPY Forecast – British Pound Plunges Against the Japanese Yen

GBP/JPY Forecast Video for 20.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound has fallen rather hard during the trading session on Friday, as we pulled back from the 50-Day EMA and the 200-Day EMA indicators. We are now approaching the ¥160 level, a large, round, psychologically significant figure and an area that I think will continue to attract a certain amount of attention as we have seen buyers step in and underneath that level over the course of this past week.

That being said, we could break down below the bottom of the Thursday candlestick which of course would be negative, and in that scenario, we can send this market down to the ¥157.50 level, which is an area where we would see a lot of support based upon previous action in January. Market players continue to see this as a proxy for the Japanese bond rates, and as the Bank of Japan has determined that the yield curve control dictates that the 10 year yield cannot break above 50 basis points. If interest rates rise, then it forces the Bank of Japan to step in and start printing yen to buy bonds and drive those rates down. On the other hand, if rates start to fall, then it allows them to simply let the market breathe. This is the phase that we are in right now, and therefore it’s likely that we see plenty of noise going forward that suggests that the unwinding of the short Japanese yen trade may continue.

The ¥162.50 level above is an area that seems to be a very significant barrier, but if we were to break above that level then it’s possible that the British pound could find itself testing the ¥165 level. That being said, this is a situation where you have a lot of back-and-forth, but it certainly looks as if the sellers have a little bit of an upper hand at the moment. Choppiness will continue to be the play going forward, so make sure you are very cautious with your position sizing and therefore trading smaller amounts probably makes the most sense.

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