- The GBP/JPY saw some initial retreat during Friday's trading session, but it swiftly changed course, surging upwards as it appears that risk appetite is making a comeback in the market.
- In this particular market environment, whenever we witness a pullback, it becomes almost a certainty that buyers will enter the scene to scoop up \British pounds, driven by the substantial interest rate differential between the two currencies.
The ¥185 level looms above as a prominent, round, and psychologically significant figure that demands our undivided attention. Historically, this level has served as a major stumbling block, giving traders pause. However, it is entirely possible that we are getting ready to finally leave it behind.
Just beneath the market's recent bullish move, the 50-Day Exponential Moving Average lies, acting as a substantial support level. If, by any chance, we see a breakdown below this level, it might open the door to a descent towards the ¥181 level. However, given the strength of the recent surge, it is highly likely that buyers will continue to emerge, regardless of the market's immediate direction. This presents an enticing opportunity to participate in the market and capitalize on the substantial interest rate differential, earning daily dividends.
Looking to Buy on Pullbacks
Looking ahead, if we can manage to break above the ¥186.50 level, we could be looking at a real opportunity for an upward push, with potential targets as high as ¥190 and, ultimately, even ¥200. In the grand scheme of things, it's apparent that the Bank of Japan is quite far from considering any tightening of its monetary policy. Despite their attempts to influence the market, the reality is that Japan's ability to significantly strengthen its currency in the near term is rather limited. Ultimately, this will remain the key determinant in the market.
Moreover, it's worth noting the considerable strength displayed by the market throughout the day, evident in the size of the candlestick. Given this momentum, it's reasonable to expect that it will eventually overpower any resistance above. In a market that has maintained a bullish trajectory for months, there seems to be little reason to go against the grain. Each pullback in the current landscape represents a potential buying opportunity, and as things stand, I find it impossible to short this market anytime soon.
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