- The GBP/JPY rallied during Wednesday's trading session, reflecting the prevailing bullish pressure in the market.
- However, it is worth noting that the market faces significant resistance ahead, posing challenges for further upward movement.
- If the market surpasses this resistance, it will likely target the ¥172.50 level, representing the most recent swing high. Breaking above that level could transform the market into a "buy-and-hold" situation, aiming toward the ¥175 level.
Given the prolonged bullishness of this pair, buying on short-term pullbacks remains an appealing strategy. Ultimately, the market will strive to find value, and there appears to be ample support, extending at least down to the ¥167.50 level. Additionally, the rising 50-Day Exponential Moving Average (EMA) located just below that level provides technical support. The crucial level determining the overall trend lies at ¥165. A breach below this level could potentially lead to significant changes in this specific currency pair and across various Japanese yen currency pairs.
The Bank of Japan's continued practice of yield curve control makes it highly unlikely for the Japanese yen to strengthen against other currencies in the long term. Consequently, the market remains favorable for "buy on the dip" strategies, a trend expected to persist in the foreseeable future. While a bullish flag pattern can be identified with some interpretation, it may not be optimal. Nonetheless, the presence of numerous buyers in the area, particularly after the impulsive candlestick formation two weeks ago, highlights the strong demand in the market.
Keep a Reasonable Position Size
Maintaining a reasonable position size is advised, considering the potential challenges and resistance around the ¥172.50 level. Nevertheless, the market is clearly building up pressure, indicating an imminent attempt to break through. Over time, this market appears to present a one-way trade opportunity.
TL;DR: the British pound rallied against the Japanese yen, reflecting the ongoing bullish pressure. However, significant resistance lies ahead, which may impede further upward movement. Targeting the ¥172.50 level is possible, and the market's ability to surpass this level will determine its potential for a sustained upward trend. Considering the strong support levels, including the rising 50-Day EMA, buying on pullbacks remains a favorable strategy. The Bank of Japan's yield curve control ensures a favorable environment for the British pound against the Japanese yen, supporting the "buy on the dip" approach. Although the area near ¥172.50 may present challenges, the market is poised to attempt to overcome it, fueled by mounting pressure.
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