GBP/JPY Forecast: British Pound Continues to Rise Against Yen

• The British pound initially pulled back just a bit during the trading session on Tuesday but has seen enough support underneath to continue to drive and higher.
• Quite frankly, this has been the way to trade this market for what seemed like a lifetime now, as the Bank of Japan is essentially stuck with a whole litany of issues.

Underneath, we have massive support at multiple levels, and traders will continue to look at various areas as crucial. The first one of course would be the psychologically significant ¥200 level, which is then also looked at through the prism of “market memory”, as the Bank of Japan intervened in that general vicinity recently. Underneath there, we have the 50-Day EMA indicator which is closer to the ¥198 level and rising. Ultimately, this is a market that I think will eventually have enough buyers to jump in and support regardless of what happens next. The main issue of course is that the market pays you at the end of every day to hold it, so therefore shorting this pair is an expensive proposition, especially if you were to do so from a longer-term standpoint.

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Buying the dips

Buying the dips going forward continues to be the way to trade this market, at least until something changes from a fundamental standpoint. It does not look very likely to happen anytime soon, so you need to keep in mind that this is a pair that has been significantly higher than current levels in the past, although we are talking about several decades ago. The Japanese are essentially stuck with the position therein, because they can either have a very cheap currency, or they can trying to protect the currency and wreck their own economy.

For years, I’ve been hearing pundits wax on about how Japan is “a bug looking for a windshield.” I think we may have finally seen the bug find out windshield, and Japan may have a very hard few years ahead of it. The currency of course will be punished as a result. About the only thing that could save the Japanese currency at this point is if other central banks around the world get aggressively loose with their monetary policy.

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