The GBP has shown signs of rallying during the early trading hours on Monday, continuing its upward trajectory above the ¥175 level against the Japanese yen. However, the GBP/JPYmarket appears to be encountering substantial resistance, suggesting that the British pound may be losing steam in this currency pair. Despite this, the market is underpinned by robust support, which is likely to attract value-based buyers.
The ¥175 level is a significant psychological barrier that traders are closely monitoring, given its history as a resistance point. A breakthrough above Monday's session high would be a bullish indicator.
On the downside, the ¥172.50 level is seen as a potential support zone. A significant downward break would make this the first major buying area. Further below, the ¥170 level, where the 50-Day EMA has recently crossed, is another key support level. It's worth noting that minor support may also be found near the ¥171.50 level.
GBP/JPY still with levels of volatility
The currency pair continues to exhibit considerable volatility, but the overall trend indicates sustained upward momentum over the long term. Essentially, the strategy is to seek out 'cheap pounds' and exploit the inherent weakness of the Japanese yen.
The Bank of Japan's upcoming meeting on Friday could influence the currency pair's dynamics, although the bank has already hinted at maintaining its current monetary policy. Therefore, the interest-rate differential continues to favor holding onto this currency pair, making it unlikely for traders to abandon it abruptly.
The ultimate target appears to be the ¥177.50 level. However, traders should avoid excessive exposure to any single currency pair, especially in a week filled with central bank meetings. This caution is due to the potential for policy changes that could significantly impact currency markets.
At the end of the day, while the British pound shows signs of fatigue against the Japanese yen, the overall trend remains bullish. The market's robust support levels and the interest-rate differential continue to attract buyers. However, traders should remain vigilant due to the potential impact of central bank meetings this week.
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