The British pound experienced significant volatility during Friday’s trading session. The GBP/JPY pair is approaching a major resistance level, with traders actively influencing the market. The ¥200 level is proving to be a psychological barrier, hindering a significant upward movement.
The interest rate differential between the British pound and the Japanese yen remains a key factor in determining the market direction. The Bank of Japan is unlikely to tighten monetary policy due to the country’s substantial debt burden. This has led to unconventional monetary policies, such as the Bank of Japan purchasing a significant portion of Japanese bonds.
From a technical analysis perspective, the market has been predominantly bullish, but a slight pullback is not unexpected. Breaking above the ¥200 level could trigger further buying momentum, potentially pushing the British pound towards ¥203. In today’s market environment, momentum plays a crucial role, overshadowing fundamental factors. It is advisable not to go against the prevailing trend to avoid incurring swap costs.
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