GBP/JPY Forecast: Breaks Higher

Moving forward, traders should look for value and pay attention to interest rates as they rise, leading the Japanese yen to take a hit.

• The GBP/JPY made a significant rally during Tuesday’s trading session, breaking out to a fresh high above the ¥166 level.
• This move came after the Bank of Japan announced its decision to allow the 10-year JGB to rise to 50 basis points instead of 25.
• The market has now made a complete “round-trip,” suggesting that the Japanese yen may continue to lose ground against most currencies.
• This currency pair had lagged behind others until recently but now looks ready to lead the charge against the Japanese yen.

However, the market is entering a noisy area, so it is unlikely that it will simply take off to the outside. As long as the currency pair stays above the ¥164 level, there could be buyers on dips going forward. Additionally, the 50-Day EMA is shifting upwards and breaking above the 200-Day EMA, indicating a “golden cross,” which many longer-term traders watch. While this is a positive sign, the moving averages had previously been flat, so it is too early to call for a long-term breakout.

Moving forward, traders should look for value and pay attention to interest rates as they rise, leading the Japanese yen to take a hit. The Bank of Japan continues its yield curve control monetary policy, which further emphasizes this trend. Additionally, the currency pair’s movements can serve as a secondary indicator for other yen-related pairs. The market has formed a strong-looking candle, indicating a significant amount of interest.

Overall, the British pound has made a significant rally against the Japanese yen, breaking out to a fresh high above the ¥166 level. While the currency pair is entering a noisy area, there could be buyers on dips going forward. The “golden cross” is a positive sign, but it is still too early to predict a long-term breakout. Traders should focus on value and pay attention to interest rates, as they will likely continue to impact the yen’s movements. Overall, the British pound’s movements against the Japanese yen serve as a secondary indicator for other yen-related pairs and emphasize the market’s focus on interest rates. Expect to see a lot of noise going forward, and therefore you need to be cautious about being overexposed to it. The markets will continue to be dangerous, so please be careful with position sizing, and be prepared to take the occasional loss.

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