GBP/JPY Forecast: Continues to Plow Higher

• In Friday's trading session, the GBP/JPY fell to the 50-Day EMA, briefly dropping below the 200-Day EMA.
• However, the market turned around significantly, indicating a potential reversal.
• Now that the pound has climbed back above both moving averages, the ¥162.50 level appears to be drawing price toward it.
• The market recently broke out and then pulled back, only to find buyers again, a classic technical analysis setup that many traders may be closely watching.

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Looking at the chart, the most obvious target appears to be the ¥165 level, although it may take some time to get there. The Bank of Japan's efforts to defend the 50 basis points level on their 10-year notes means that the Japanese yen will remain weak, especially as other central banks around the world are tightening their monetary policies. In other words, Japan is the lone man out, and therefore the Japanese yen will continue to be pummeled against almost everything at this point.

Don’t Sell This Pair

In contrast, the British pound has shown some strength, which is not surprising considering the overall market conditions. As long as there is inflation in the UK, the pound will likely perform well, particularly against weak currencies like the yen. Nonetheless, it is important to pay attention to the Japanese yen's movements against other currencies, as it tends to move in the same direction regardless of the currency being compared.

Currently, selling this pair is not advisable, at least not until the market breaks below the ¥160 level, which is quite a distance from the current trading price. Instead, buying on the dips appears to be the most viable strategy for short-term charts. Take a look at shorter time frames to see signs of a pullback that gets jumped back upon, because I think that will continue to be the way forward. Whether or not we can shoot straight up to ¥165 is a completely different question, but I think given enough time we will get there. This may set up multiple opportunities to the upside, but right now there’s just nothing on this chart that tells me we should think about shorting. This pair can be volatile, but it looks like we are leaning in one direction again, which of course helps with conviction on placing one of these traits.