- The GBP/JPY gained ground against the Japanese yen during the Monday trading session, with analysts predicting a continued upward trajectory.
- This trend has been supported by the UK's high inflation rates, which have been pushing up the value of the pound.
- In contrast, the Japanese yen has been losing ground against most currencies in recent weeks.
The interest rate differential between the two currencies is also likely to support the trend. With interest rates in the UK significantly higher than those in Japan, investors are likely to favor the pound over the yen, further pushing up the GBP/JPY pair.
The market has been showing signs of a floor near the ¥168 level, as indicated by a hammer from the Thursday session. This suggests that if the pair were to dip below this level, there could be some support in place to prevent a significant decline. However, a break below this level could lead to a drop to the 50-day EMA, which is currently above the ¥165 level.
On the upside, there is significant resistance at the ¥172.50 level. A break above this level could lead to further gains, with the pair potentially reaching the ¥175 level.
The Outlook Remains Positive
Analysts suggest that it is unlikely that the market will experience a sudden sell-off, as there is currently a significant amount of risk appetite built into the market. This means that traders are willing to take on a certain amount of risk, which typically favors the British pound over the Japanese yen.
While the market may experience some volatility in the short term, the overall direction of the GBP/JPY pair appears to be upward. This presents an opportunity for buyers to take advantage of dips in the market and aim for higher levels in the longer term.
Overall, the outlook for the GBP/JPY pair remains positive, with a few factors contributing to its upward trend. If inflation rates remain high in the UK and interest rates remain low in Japan, investors are likely to favor the pound over the yen. This should provide continued support for the pair, allowing it to reach higher levels over the coming weeks and months. However, there will be the occasional pullback, so overexposing yourself in this position without confirmation could be very dangerous.
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