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GBP/JPY Forecast: The British Pound Continues to Pummel the Japanese Yen

  • The British pound has rallied significantly during the early hours on Monday, as we have now broken above the ¥198 level.
  • All things being equal, this is a market that will continue to find plenty of buyers on dips, due to the massive trend that we have seen play itself out over the last several months.
  • Despite the fact that the Bank of Japan did intervene a couple of weeks ago, the recovery suggest that the market is likely to continue to go higher, and perhaps try to get back to the ¥200 level.

GBP/JPY Forecast Today - 21/05: GBP Pummels JPY (Chart)

Interest Rate Differential

I believe that the interest rate differential will continue to keep this market going to the upside, due to the fact that you get paid to hang onto it daily. As long as there is an environment like that to be traded, there are certain amount of traders that will just simply go long and forget about it. That’s not necessarily something that I would be looking to do, but the reality is that the market most certainly is one that you cannot be short of. Because of this, I like the idea of looking for short-term dips that I can add to an already existing long position.

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    Ultimately, I think we do reach the ¥200 level, and perhaps go looking for even higher levels than that. Quite frankly, the interest rate differential is going to continue to be a major driver of where we go, and of course will be a major thing to pay attention to. After all, the market is likely to continue to see a lot of value hunting every time we do get a pullback, and I do think that once we break above the ¥200 level, the market is likely to continue to go much higher, and therefore I think this is a situation where the market participants will continue to see a certain amount of “FOMO trading” coming into the picture as well. After all, this is a market that features one central bank that simply cannot raise interest rates due to the massive indebtedness of the Japanese government.

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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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