- The GBP/JPY experienced a significant decline against the Japanese yen during Wednesday's trading session, driven by uncertainties surrounding the Bank of Japan's monetary policy.
- Notably, the central bank announced an emergency meeting, and Governor Kuroda hinted at the possibility of the "era of low-interest rates" coming to an end.
- However, whether any concrete actions will be taken remains uncertain.
It is important to consider that the market has become somewhat overextended, suggesting the potential for a pullback, possibly reaching as low as ¥170. However, recent support has been observed around the ¥171.50 level, indicating ongoing interest in that area. Should the 50-Day EMA be breached, a drop to the ¥168 level is conceivable, although it may require substantial catalysts to trigger such a move.
The ¥175 level presents a notable resistance barrier, but with sufficient time, a return to that region seems probable. However, given the market's impulsive nature in recent months, a short-term correction would be reasonable. Such a correction could serve as a favorable buying opportunity, and currently, the likelihood of such a scenario appears significant. If the top of the shooting star from Tuesday's session is surpassed, it would pave the way for a potential move toward the ¥175 level. Any further breakthrough beyond that level would attract more buyers, reinforcing the longer-term uptrend. Considering the current trajectory, it would not be surprising to witness the British pound trading around ¥200 later this year or early next year.
Be Cautious
At present, the focus lies on identifying potential value through a pullback. While the candlestick pattern from Wednesday's session offers a positive starting point, it may be prudent to await further confirmation before executing trades. Nonetheless, the intention is to refrain from selling the pair soon.
TL;DR: the British pound faced a sharp decline against the Japanese yen due to concerns surrounding the Bank of Japan's monetary policy. The market appears overextended, suggesting the possibility of a pullback. Notable support lies at the ¥171.50 level, while a breach of the 50-Day EMA could drive the pair toward ¥168. Although the ¥175 level poses resistance, a return to that region remains plausible in the long term. Short-term corrections may offer attractive buying opportunities, and it is essential to monitor key technical levels for further confirmation. The current outlook favors caution about selling the pair.
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