- The GBP/JPY exhibited a minor retreat during Thursday's trading session, briefly testing the ¥187.25 level—an area that has previously proven to be a bastion of support.
- The key question at hand is whether this level can withstand the pressure once more. If it fails to hold, the subsequent support level to watch for is situated at ¥186.65.
- It's crucial to bear in mind that despite these fluctuations, we are firmly in an uptrend, a major factor that demands you pay attention to it. However, this isn’t to say that you just jump in with both feet right away.
A significant development to monitor is the potential for a breakout above the hammer-shaped candlestick that materialized during Wednesday's session. Such a move would signify a continuation of the upward trajectory and open up the possibility of advancing towards the ¥190 level. Beyond that, I hold the belief that this currency pair has the potential to reach the 200-Day EMA. Given the prevailing impulsive upward movement, it is entirely logical to anticipate either a consolidation phase or a slight retracement as the market seeks value.
Avoid Shorting the Market
One of the pivotal drivers in favor of the British pound is the enduring interest rate differential between the two currencies. Holding this pair yields favorable returns, which attracts investors seeking positive swaps—a characteristic highly favored by long-term investors. Consequently, I foresee continued upward pressure and anticipate that buyers will seize opportunities to accumulate value. It is worth reiterating that shorting this market appears unwise, as the Japanese yen is poised to remain unattractive in the near term.
In the end, all factors considered, the market's course appears poised to maintain its upward trajectory. Attempting to counter this prevailing trend would likely result in losses. It's imperative to view the market with this perspective in mind. Until the Bank of England enacts a shift in its monetary policy, there is little reason to anticipate a change in the overall trend. In contrast, the Bank of Japan has signaled its reluctance to deviate from its current stance, further reinforcing the status quo in this currency pair and its overall trend. I just cannot bring myself to think of buying the yen, and won’t do so until something drastic happens in the market and central bank statements of these two countries.
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