GBP/JPY Forecast Video for 31.05.23
British Pound vs Japanese Yen Technical Analysis
The British pound has been all over the place against the Japanese yen during the trading session on Tuesday, as the Bank of Japan has called an emergency meeting. This has the trading of the Japanese yen a bit dicey during the session, as traders are probably worried that the Bank of Japan will tighten monetary policy a bit, as they are seeing that they can either fight inflation by loosening monetary policy or defend their currency, but not both.
At this point, the Japanese will have to do one or the other, and traders of course are worried that they’re going to change directions. If they do in fact tighten monetary policy like the other central banks do, shorting this pair will be one of the better trades of the year. I don’t necessarily think this is going to be the case, at least not for anything that is enough to turn around the entire trend.
The ¥170 level underneath is a large, round, psychologically significant figure, and a lot of people will be paying close attention to it. The 50-Day EMA is racing toward that area as well, so I think it all sets out for a hard floor in the market. However, there’s also a significant amount of support near the ¥171.50 level, so I don’t even think we break down below there unless of course the Bank of Japan shocks the market.
All this being said, I do think that a pullback opens up another buying opportunity, but you need to see stabilization before that happens. Furthermore, this is a market that I think will eventually go look into the ¥175 level, and every time we pull back you have to start thinking about the possibility of offering a bit of value. The market has been very strong for a long time, but due to the major interest rate differential. Even if the Bank of Japan does shock the market, it would take something rather special and something more sustained to make the market change the overall direction of the market.
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This article was originally posted on FX Empire