• During Friday’s trading session, the British pound staged an impressive recovery and showed a parabolic rise.
  • The Bank of Japan remains committed to maintaining loose monetary policy, which explains the continued weakness of the Japanese yen.
  • Conversely, the Bank of England is struggling with high inflation, which puts pressure on the British pound. It is worth noting that the market witnessed a number of significant candlesticks, indicating a highly bullish environment.

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However, given the unwavering stance of the Bank of Japan, it is almost impossible to consider shorting this market. While it is true that the market appears overstretched, it is only a matter of time before buyers re-enter the scene and take advantage of the perceived affordability of British pounds. It is important to note that the ¥175 level is a significant support level, although at the time of writing it represents a decline of over 600 pips.

Looking ahead, I expect the market to eventually target the ¥185 level and there is even potential for a longer-term rally towards ¥200. However, caution is warranted in the current circumstances as we have already seen a 600 pip increase in the span of a week. Therefore, it is wise to be patient and wait for a favorable opportunity to enter long positions at lower levels. Trying to sell in such a bull market is a futile endeavor. As a result, we can expect a large number of market participants to try to chase the upward momentum. However, savvy traders will realize that it is important to wait for a reasonable valuation before getting involved. Watching the market at its current elevated levels invites financial losses.

The British pound finally experienced a substantial rally during Friday’s trading session, fueled by a parabolic move. The Japanese yen continues to weigh on the Bank of Japan’s commitment to easing monetary policy. Conversely, the Bank of England is dealing with inflationary pressures and strengthening the strength of the British pound. The impulsive nature of the market makes shorting a daunting prospect given the Bank of Japan’s stance. Although the market may appear overloaded, buyers are likely to re-enter the market at lower levels. The ¥175 level serves as significant support, although it represents a significant downside. There is a future target of ¥185 and the possibility of reaching ¥200, but chasing the market at current levels is unwise. Patience is key as savvy traders wait for the right moment to enter long positions. Engaging in sales efforts within this bullish the environment is an exercise in futility, with value-based strategies being the preferred approach.


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