Despite the potential challenges, the longer-term outlook remains bullish, with occasional opportunities to buy value on a pullback.
- The British pound showed signs of stabilization in Thursday’s trading session, reconfirming its overall uptrend.
- However, traders should expect some near-term tearing due to the currency’s overextended position.
- When markets become parabolic, they often either consolidate sideways or experience a decline.
- Currently, it appears that the British pound may spend more time moving sideways, despite Wednesday’s negative session.
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A critical level to monitor GBP/JPY currency pair is a 180 yen mark that has meaning both psychologically and technically. This level is likely to attract support in the event of a pullback. Moreover, even if the price falls below ¥180, the 50-day exponential moving average (EMA) near ¥175 is expected to act as a major influence and provide further support. So the market is unlikely to fall below this level easily. A break above ¥175 would require a reassessment of overall market conditions.
On the other hand, the 185 yen level serves as a point of psychological resistance. Looking from a longer-term perspective, it is possible that GBP/JPY may eventually target the ¥200 level. However, achieving this milestone may not happen quickly or without problems. Meanwhile, market participants should consider the pullback as a potential buying opportunity. The market has shown resilience and the differences in monetary policies between the Bank of England and the Bank of Japan continue to support the upward pressure on the pair. Inflation concerns from the Bank of England, along with loose monetary policy from the Bank of Japan, are contributing to continued GBP/JPY strength.
In conclusion, GBP/JPY is poised for further gains as the British pound continues its rally against the Japanese yen. While there may be short-term tearing due to an overexposed currency position, the market is likely to consolidate sideways rather than see a significant decline. Key levels to watch include psychological support at ¥180 and 50-day exponential moving average (EMA) almost 175 yen. Upward resistance is expected at 185 yen. Despite the potential challenges, the longer-term outlook remains bullish, with occasional opportunities to buy value on a pullback. Divergent monetary policies by the Bank of England and the Bank of Japan continue to play a significant role in boosting the pair. Traders should remain alert to any shifts in market dynamics and closely monitor central bank moves to move this currency pair effectively.