GBP/JPY Forecast: Consolidates Amidst Extended Uptrend

The contrasting monetary policies pursued by the Bank of England and the Bank of Japan drive the underlying forces behind the pair’s ascent. 

• The GBP/JPY displayed signs of stabilization during Thursday’s trading session, indicating the continuation of its overall uptrend.
• However, due to the extended nature of the rally, choppiness is expected in the near term.
• This article examines key levels of support and resistance for the British pound and analyzes the factors driving its upward trajectory.

The British pound has embarked on an impressive uptrend, but its current overextended state suggests the likelihood of choppy trading ahead. When markets experience parabolic movements like this, they typically undergo a period of consolidation or a temporary pullback. Despite a negative session on Wednesday, it appears that the British pound may consolidate sideways for the time being.

Beneath the ¥180 level lies a significant psychological barrier that attracts considerable attention from market participants. If the pound were to pull back towards this level, it would likely find support as buyers consider entering the market. Furthermore, the 50-Day Exponential Moving Average (EMA) near ¥175 is expected to exert a major influence on price action. This level currently acts as a key support and breaking below it would prompt a reevaluation of the overall market conditions.

On the upside, the ¥185 level represents a psychological resistance point. From a longer-term perspective, it is conceivable that the pound may eventually target the ¥200 level. However, achieving this milestone may not be immediate or without challenges. In the interim, pullbacks can be viewed as potential buying opportunities due to the pound’s resilience. Notably, the Bank of England’s concerns over inflation, coupled with the Bank of Japan’s loose monetary policy aimed at generating inflation, contribute to the currency pair’s dynamics.

Considering these factors, the British pound is expected to face upward pressure over the long term, interspersed with occasional opportunities to purchase at value prices. The contrasting monetary policies pursued by the Bank of England and the Bank of Japan drive the underlying forces behind the pair’s ascent. The market remains attentive to inflationary pressures and closely monitors developments on both sides of the currency swap.

Ultimately, the British pound’s current stability suggests the continuation of its overall uptrend, albeit accompanied by a period of consolidation. Traders should remain cautious of the pound’s extended nature and anticipate choppiness in the near term. Opportunities to buy on pullbacks may arise as the currency proves its resilience amidst differing monetary policies pursued by central banks.

Ready to trade our Forex daily forecast? We’ve shortlisted the best regulated forex brokers UK  in the industry for you.