On Monday, the gbp/jpy rate hesitated near the 200-Day EMA, and the market has been noisy. There is a significant amount of resistance at the ¥162.50 level, and the 200-Day EMA is just above it. The 50-Day EMA is just underneath and could provide support. If the market breaks below the 50-Day EMA, it's likely to drop down to the ¥160 level, an area that's been both support and resistance recently. Anything below that level would be negative, but there should be buyers in that general vicinity.
As a result, this scenario is likely to remain a "buy on the dip" type, especially if interest rates start to rise around the world again. The Bank of Japan is doing everything it can to keep interest rates down, which means they are buying Japanese Government Bonds to keep the 10-year yield below or at 50 basis points. This is the same as printing currency, which flooded the market with the Japanese yen, something that moved the market significantly last year.
GBP/JPY Technical Outlook
- If the market breaks below the ¥160 level, it's likely to go down to the ¥157.50 level, where it had bounced from a couple of times.
- In any case, a lot of choppy and noisy trading is expected, and the volatility is likely to become much more drastic going forward.
- It's worth noting that North American banks were closed on Monday, so it was only essentially half a day of normal trading.
In summary, on Monday, the British pound hesitated near the 200-Day exponential moving average, and the market has been noisy. The resistance at the ¥162.50 level is significant, and the 200-Day EMA is just above it. The 50-Day EMA is just underneath and could provide support. If the market breaks below the 50-Day EMA, it's likely to drop down to the ¥160 level, an area that's been both support and resistance recently. Traders should pay attention to the volatility, which is likely to become much more drastic going forward. Look at this, I think that it mainly comes down to what’s going on with interest rates on the 10 year JGB, as the Bank of Japan will continue its fight. They have reiterated more than once that they are “all in” on keeping things under 50 basis points. Furthermore, you have to pay attention to the British pound, but I think that is somewhat secondary now.
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