GBP/JPY Forecast – The British Pound Continues to Find Buyers on Dips

GBP/JPY Forecast Video for 18.10.23

British Pound vs Japanese Yen Technical Analysis

The British pound has pulled back a bit during the trading session on Tuesday, showing signs of hesitation. The 50-Day EMA of course is going to continue to be very crucial, and the fact that we are sitting right around there suggests that if we were to turn around and break above the last couple of candlesticks, then the market could go looking to the ¥185 level. The ¥185 level is an area where we have seen a lot of noise in the past, it is probably worth noting that recently we have seen so much in the way of noisy behavior that I think we are simply trying to determine whether or not we can go higher.

If we break down below the bottom of the candlestick for the last couple of days, then the ¥180 level gets targeted. The ¥180 level underneath is a large, round, psychologically significant figure that a lot of people will be paying close attention to, and I do think that it is essentially the “floor in the market.” The shape of the candlestick does suggest a little bit of buying pressure, but ultimately, I think we are going to continue to be somewhat range bound after the massive move higher.

In general, the market also tends to move on risk appetite, which of course is all over the place. However, the one thing that has changed everything recently has been the fact that the Bank of Japan absolutely steadfastly refuses to tighten monetary policy, making it the lone major central bank that keeps monetary policy loose. At the same time, everybody else offers quite a bit more in the way of interest rates, therefore you get paid to hang on to this position.

While I am not much of a “carry trade” type of investor, larger investment houses do of course pay quite a bit of attention to this, and it does offer a reason to get long of a pair like this. The fundamentals still point to the upside, but we also have a lot of noise at the moment when it comes to geopolitical issues, interest-rate markets, and the overall narrative.

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