GBP/JPY Forecast: Continues to Find Buyers Against the Yen

• During Monday's trading session, the GBP/JPY experienced a slight pullback but found plenty of buyers near the ¥163 level.
• The ¥162.50 level is also an area that has been signed previously, indicating that there is a lot of support underneath.
• The 50-Day EMA looks set to turn around and break above the 200-Day EMA, which is known as the "golden cross."

The ¥165 level above could be a potential target since the market pierced it previously, only to turn around and experience a significant downturn. However, the situation is heavily influenced by the Bank of Japan, which is going to continue to keep interest rates low in their country. To do so, they will have to buy bonds and print yen, which they have promised to do "an unlimited amount." In other words, they are going to flood the market with Japanese Yen but drive down the potential value and demand for that currency. It’s a simple supply/demand question.

Momentum Will Likely Continue

Ultimately, the market has been bullish for quite some time, indicating that momentum will likely continue to be present in this market. However, it's essential to keep in mind that when we spiked recently, we tested the top of a significant selloff, which will continue to be a major target. Breaking above this level is going to be incredibly challenging, and it's unlikely to happen anytime soon. When it does happen, the market could really start to take off to the upside, go looking to the ¥170 level.

Short-term pullbacks are likely to present buying opportunities, but it's crucial to remember that the market is going to be very noisy. This is due not only to the Bank of Japan's influence but also because this pair is sensitive to risk appetite, which is fluctuating heavily at present. This means that people may run to the yen when overall rates drop, or if there is a significant economic concern. Eventually, a more substantial decision will have to be made, but for now, it seems like there is more noise than anything else in this market. All things being equal, this is a market in that I do favor the upside, but that doesn’t mean that we won’t get the occasional slam lower. If we were to break down below the ¥161 level, that could change things, but right now I don’t see that happening anytime soon.