- On Wednesday's trading session, the British pound attempted to rally against the Japanese yen.
- However, traders should be cautious as this pair exhibits a lot of noise, and we are approaching an area where we had a massive "wipeout candle" from previous trading.
- The current level of ¥166 is critical, and traders should pay close attention to any developments in the market.
Looking for Value on Pullbacks
The GBP/JPY pair is highly sensitive to risk appetite, and traders should be cautious with their position sizing. As such, traders should consider longer-term charts and exercise patience when trading this pair. Although the currency has recently gone higher, it is essential to look for value on pullbacks to take advantage of the market. At this point, it is difficult to see a reason to short this market other than a short-term trade at best, and that would more likely than not be risky.
If the pair breaks down from the current level, the ¥163 level should offer significant support, especially with the 50-Day exponential moving average racing towards it. This level should attract value hunters, and traders should look for supportive candlesticks to confirm it's time to get long again. However, if the pair breaks below the 50-Day EMA and the 200-Day EMA, it could trigger a significant move down to the ¥160 level, which is the bottom of the overall range.
It's worth noting that the Bank of Japan continues to do yield curve control policy, which means that the Japanese yen will continue to be somewhat soft in general. The British pound, on the other hand, has been one of the better performing currencies of the year. With this in mind, it seems that buyers have control of the market, and the GBP/JPY pair remains a bullish trend. Because of this, pullback will continue to attract a lot of attention, as the value proposition of buying returns.
In conclusion, traders should keep a close eye on key levels and market sentiment when trading the GBP/JPY pair. While the current level of ¥166 is critical, traders should exercise patience and wait for pullbacks to look for value in the market. Additionally, traders should remain cautious with their position sizing and be aware of the significant support at the ¥163 level. Overall, the GBP/JPY pair remains highly sensitive to risk appetite, and traders should adjust their trading strategies accordingly.
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