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GBP/JPY Forecast: Surges on Strong UK Data

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
  • You can see that initially the British Pound did pull back a bit against the Japanese Yen during trading on Friday, but then shot much higher after PMI numbers in the United Kingdom came out hotter than anticipated.
  • This is good for the British Pound, and we have seen the British Pound outperform most currencies during the trading session as you would expect.

The 195 yen level is an area that's been a bit of a barrier in the past. So, it'll be interesting to see how we behave once we get there. If we can break above that level and go looking to the 200 yen level, I expect a major fight. The bank of Japan overnight did raise rates, but they made it sound like they're pretty neutral at this point. And if that's going to be the case, that means the interest rate differential and the carry trade will still be a thing. As long as that ends up working out in favor of traders, then I just don't see how anything other than upward momentum against the yen is seen by most currencies.

I Won’t Be Shorting Very Soon

GBP/JPY Forecast Today 27/01: Surges on UK Data (graph)

I have no interest whatsoever in getting too cute with this, but I do recognize that a short-term pullback might be what you're looking for, for a little bit of a buying opportunity. I also believe that the British pound, although much stronger than the Japanese yen may lose a little bit of momentum. So, we may see more of a grind to the upside than anything else. I do not expect anything other than consolidation between 190 yen on the bottom and 200 yen on the top, at least as far as I can reasonably look to the future. With this, I am neutral and positive more than anything else. Tactical short-term trades are probably the way forward.

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Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

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