The bullish sentiment is further confirmed by the massive candlestick observed in Tuesday’s session, which indicates market optimism.

  • The GBP/JPY saw an initial decline during Wednesday’s trading session, reflecting continued volatility in the Japanese yen. However, this decline was temporary, with the currency quickly recovering and showing promising signs of resilience.
  • The pound is expected to continue its upward trajectory against the yen, driven by the significant interest rate differential between the two countries.
  • That is expected to persist as the Bank of Japan, which is due to meet on Friday, has indicated there will be no upcoming changes to its monetary policy.

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At the same time, the Bank of England is facing challenges inflation, as indicated by rising hourly wage numbers. This trend suggests the potential for further inflation, leading the Bank of England to adopt a tighter stance compared to the Bank of Japan. This policy divergence underpins the current dynamic. At the same time, the ¥175 level is expected to offer significant support to the pound, given its role as a psychological gauge and past resistance level.

The bullish sentiment is further confirmed by the massive candlestick observed in Tuesday’s session, which indicates market optimism. This outlook paints a favorable picture for the pound, potentially driving it to trade at ¥180. Given the robustness of the current trend, buying on dips appears to be a viable strategy as it is difficult to predict a reversal in the near future. The market is expected to maintain its momentum, prompting traders to ride this strong trend.

While the ¥180 level may represent some psychological resistance, the long-term charts suggest a potential resistance level of ¥177.50. However, this is not expected to significantly hinder the pound’s advance. Given the current market conditions, the currency is likely to break above these resistance levels relatively easily. But that doesn’t mean it has to happen immediately.

The GBP/JPY pair has shown remarkable resilience over the past few months and has become an outstanding performer in the currency market. This trend shows no signs of abating, supported by diverging monetary policies from the Bank of England and the Bank of Japan. In the current environment, the British pound appears to hold the upper hand, buoyed by the persistent interest rate differential and inflationary trends. Traders are likely to continue to view the interest rate differential as a major driver going forward. This continues to be the way forward.

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