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GBP/JPY Forecast: Bullish on Interest Rate Differential

  • In my daily GBP/JPY analysis, the British pound has shown itself to be very strong yet again against the Japanese yen as we continue to see upward trajectory, mainly based on the interest rate differential.
  • It does make a lot of sense that we would see this.
  • After all, the market is going to continue to be a situation where people take advantage of cheap pounds anytime they get the opportunity.

You also have to keep in mind that the GBP/JPY market is going to see this as a situation where traders look at this as being a little extended to the upside, but over the longer term, I do believe that the interest rate differential will continue to push this market higher over the longer term and it would just be too much for traders to ignore.

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    A pullback at this point in time would be looking toward the 205 yen level as potential support. On the other hand, if we break down below there then we could be looking at a move down to the 200 yen level which would be an excellent value opportunity from what I see. If for some reason we do drop to the 200 level, I think a lot of people will jump into the market right away on the first signs of strength.

    Noisy, But Bullish Overall

    GBP/JPY Forecast Today 10/7: Bullish (graph)

    All things being equal, this is a market that will continue to be very noisy. But really at this point in time, you have to keep in mind that the bank of Japan has no real recourse due to the fact that they simply cannot do anything about interest rates. The debt in the country of Japan is so overdone at this point in time that any type of interest rate hike is off the table. They have shown proclivity to intervene from time to time, and that is a possibility. But right now, I think any intervention will only be met by more buying on the dip. So therefore, I remain long and strong.

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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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