- The GBP/JPY kicked off Tuesday's session with a rally, showing some initial strength.
- However, it later relinquished those gains to pull back a bit, which might just offer an opportunity to find some value.
- This doesn't necessarily indicate a major shift; it's more about the market getting a tad overextended. In this scenario, the focus shifts to uncovering value and seizing the chance to grab "affordable British pounds."
When you analyze this chart, you'll notice there's a lot to consider, including the fact that we're somewhat stretched. The key question now is whether we're going to move sideways or possibly form a bullish flag pattern. My bet is on the latter. I'm eyeing the prospect of going long in this market, especially around the ¥185 mark. The 50-Day Exponential Moving Average is hanging out near ¥181 and rising. This level seems like a solid support point. Just below that, ¥180 has historical backing, and it's also a round, significant figure that carries weight.
Interest Rate Differentials Favor this Pair
In the grand scheme of things, this market remains quite noisy. Nonetheless, it's firmly in an uptrend. So, going short in the near future doesn't seem to be the wisest move. This sentiment is further solidified by the Bank of Japan's commitment to maintaining loose monetary policy for quite some time, at least based on all the information I've come across. On top of that, the interest rate differential provides an incentive to hold onto this pair. Adding to the picture, if you peek at this on a historical chart, you might just entertain the idea that we could reach ¥200 eventually. Of course, I won't sugarcoat it—¥190 could pose a substantial hurdle. Still, when you glance at the chart, there's nothing that screams we can't overcome that obstacle.
To wrap it up, the British pound started Tuesday with a rally, but then it pulled back, creating a window for potential value. The market's stretch doesn't indicate a drastic shift; it's about seizing an opportunity. The chart analysis leans towards forming a bullish flag pattern. I'm leaning towards going long around ¥185, and the rising 50-Day EMA around ¥181 seems like solid support. Beneath that, ¥180 holds its ground. Despite the noise, the market's uptrend is pretty clear, making shorting not the best plan. The Bank of Japan's loose monetary policy and the interest rate differential are in favor. Looking historically, ¥200 isn't out of the question. While ¥190 might be a hurdle, nothing says we can't clear it based on the chart's indicators.
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