GBP/JPY Forecast – The Dragon Continues to Press to the Upside

GBP/JPY Forecast Video for 22.05.23

British Pound vs Japanese Yen Technical Analysis

The British pound initially pulled back during the day on Friday, but just as we had seen on Thursday, buyers came back to push the market higher. Ultimately, this is a situation where the British pound is going to continue to be much stronger than the Japanese yen as the Bank of Japan has shown itself to stick to its guns when it comes to quantitative easing. If that’s going to end up being the case, the market is likely to continue to see a run toward the ¥175 level, perhaps even higher than that.

While the British are going to continue to fight inflation, the Japanese are clearly staying loose with their monetary policy as the Bank of Japan continues to reiterate its plans to keep interest rates on the 10 year JGB down to 50 basis points or lower. In order to do this, they will be printing more yen, flooding the market with supply. Alternatively, while the British are fighting inflation, they are tightening monetary policies of the interest rate differential alone make sure that this pair goes higher over the longer term.

On pullbacks, there should be plenty of buyers, just as we have seen over the last couple of trading sessions, and I think that continues to be the case for a while. The 50-Day EMA is near the crucial ¥167.50 level, an area that should continue to be very important. Given enough time, this is a market that should continue to see plenty of value hunters every time the British pound becomes just a bit “cheaper” than it was before. The Japanese yen is destined to continue to lose strength, because you can either tighten monetary policy to fight inflation or not. There is no middle ground. You either tighten monetary policy to strengthen the currency, and fight inflation, or you lose strength in your currency. This is the conundrum that the Japanese find themselves in after years and years of quantitative easing. Given enough time, we could see this pair back above the ¥200 level.

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