Technical Analysis Indicators

Right now, there’s immediate resistance at Wednesday’s high of 205.35. Trendline resistance is at 206.15, while the 161.8% Fibonacci retracement level from the rally on October 7-8 is at 207.56. On Thursday, the Yen performed well against the Pound compared to other major currencies. The Japanese Yen showed significant strength against the GBP, reflected in percentage changes against other currencies. A heat map illustrates currency changes, showing base currencies in the left column and quote currencies in the top row. For example, the JPY/USD change indicates that the Yen is strengthening against the Dollar. The document also offers additional analysis, forecasts, and insights into currency markets.

Short Term Bearish Correction

Since the GBP/JPY rally is stalling below 205.00, we should get ready for a short-term bearish correction. The pair seems overbought after a nearly 3% increase this week, indicating that momentum is slowing. Last week, UK inflation data came in at 2.9%, which prevents the Bank of England from lowering rates and supports the Pound’s strength. Weakness in the Yen continues to be the main long-term factor, driven by expectations of looser fiscal policies in Japan. The new government has announced plans for a supplementary budget to boost the economy, which is likely to keep the Bank of Japan supportive. This policy difference with the UK is important, as the BoJ is one of the few major central banks not tightening its policies. In the coming weeks, we can look at strategies to profit from a temporary drop, like buying put options with strike prices around 203.00 and 202.10. This allows us to take advantage of the expected pullback while managing our risk. The 4-hour MACD indicator turning bearish supports this short-term downward outlook. Once the correction finds support, likely around the 202.00 level, we should prepare to reposition for the larger uptrend. The overall story of a strong Pound against a weak Yen hasn’t changed, so this dip could be a buying opportunity. We might then consider entering long futures contracts or buying call options to target a move back toward the 205.00 highs and beyond. It’s also important to note that implied volatility for one-month GBP/JPY options has risen to 12.5%. This indicates that the market expects larger price swings, similar to the volatility seen in late 2022. It’s essential to use disciplined stop-losses on any position. The current situation suggests a two-step strategy: take a tactical short position now, followed by a strategic long position later. Create your live VT Markets account and start trading now.

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