At present, the focus lies on identifying potential value through a pullback.
- 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.
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.
Ready to trade our daily Forex analysis? We’ve made this UK forex brokers list for you to check out.