- The GBP/JPY faced a challenging trading session on Friday, as it initially attempted to rally but eventually succumbed to downward pressure.
- The key issue in this market continues to be the area above the 50-day Exponential Moving Average (EMA), which has proven to be a source of noise and resistance.
- This market's outlook appears clouded by geopolitical concerns and the global trend of rising interest rates.
One significant factor contributing to the British pound's woes was the Bank of England's stance, as it hinted at its reluctance to take measures to support the economy. If this stance persists, it could potentially lead to a decline in the British economy, which would exert a substantial influence on the currency's future performance.
The recent price action in this market has been rather negative, and there is a growing likelihood that it could head towards the ¥180 level. This level holds historical importance as a major support level and is also a psychologically significant round figure. Beneath this level, there exists a substantial amount of support.
Considering the current conditions, it is essential to approach trading cautiously. The market is expected to remain volatile, making it prudent to manage position sizes carefully. Moreover, the prevailing uncertainty in the market suggests that adopting smaller positions could protect your trading account. While occasional winners may come your way, they could quickly turn into losses, given the unstable environment.
Risk Management is Necessary
In this highly precarious market, a slow and methodical approach is advisable. It may be wise to start with small positions and then add to your trades as they move in your favor. Risk management is paramount in this situation, and it is crucial to carefully consider how you allocate and spread your risk. In other words, you need to be very careful at this point.
In the end, the British pound is currently facing a challenging environment characterized by resistance near the 50-Day EMA, geopolitical concerns, and the global trend of rising interest rates. As the currency appears to be in a precarious position, exercising caution and implementing effective risk management strategies are essential for traders. If you are inclined to take a short position against the Japanese yen, it may be worth considering a position in the US dollar, given the current toxic outlook for the British pound.
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