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GBP/JPY Forecast: British Pound Continues to Rally Against Yen Despite Bank of England

  • The British pound initially fell during the trading session on Thursday against the Japanese yen but has since turned around despite the fact that there are members at the Bank of England that have voted to cut rates.
  • Ultimately, there were to members on the Monetary Policy Committee that voted for cutting rates.
  • This would be the first signs of the Bank of England think about cutting rates, but ultimately the interest rate differential between the United Kingdom and Japan is massive, and therefore I think you get a situation where traders continue to hang on to this pair.

GBP/JPY Forecast Today - 10/05: Turn Around (Chart)

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    Technical Analysis

    The technical analysis for the GBP/JPY pair is fairly straightforward in the sense that we have been in a massive uptrend for months, and of course we have seen the 50-Day EMA act as a trend line quite perfectly since the beginning of the year. In other words, every time we pull back, I’ll be looking to get into this pair is closer the 50-Day EMA is possible. This of course assumes that we are going to pull back, and quite frankly the only reason we did pull back to begin with from the recent swing high as that the Bank of Japan got involved. Regardless though, central bank intervention rarely sticks for the long term, and it certainly doesn’t look like it’s going to here. Remember, the Bank of Japan cannot raise rates too much, or it will absolutely destroy the Japanese economy.

    Underneath, I believe that the trend is defined by the ¥190 level, and as long as we can stay above there the trend is very much intact. This does not mean that we go straight up in the air or that it’s easy to get to the ¥200 level, but I think ultimately that’s the target. I will be looking to buy every dip as a potential value plays, as it offers “cheap British pounds” when it comes to the measurement against the feckless Japanese currency. I have no interest whatsoever in trying to short this pair, or anything else denominated in Japanese yen.

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    Christopher Lewis
    About Christopher Lewis

    Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

     

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