The British pound showed strong gains during Wednesday’s trading session as the Japanese yen faced significant pressure. The market remains bullish, with the Japanese yen expected to continue facing selling pressure due to its low interest rates over the long term.
After a sharp sell-off on Tuesday, market sentiment has turned around, with focus now on the ¥200 level. While some fear initially impacted the market, the current outlook suggests a more positive trend. The Bank of Japan’s ability to influence interest rates is limited due to the country’s high debt levels, leading to a cycle of low rates. As a result, buying opportunities are likely to be seen in the market.
Looking ahead, the possibility of an upward breakout is anticipated, potentially reaching levels beyond ¥205. This structural trend is expected to continue unless there is a significant shift in either British or Japanese economic policies. Therefore, remaining bullish on the GBP/JPY pair is advisable, with a strategy of buying on dips for potential long-term gains.
In conclusion, it is recommended to avoid shorting the GBP/JPY pair and instead focus on buying opportunities. Maintaining a core position in this pair is a prudent strategy for traders looking to capitalize on potential market trends.