The British pound has shown a significant rally against the Japanese yen during the Monday session, with an upward trajectory continuing. This can be attributed to the wide interest rate differential between the two currencies. Many traders are holding onto this pair to collect swap at the end of each session.
Short-term pullbacks in the GBP/JPY pair present buying opportunities, particularly near the 203.50 level that was broken above earlier in the session. Support levels can be found at 202 yen and 200 yen, with the 50 day EMA approaching the 200 yen level. The 205 yen level acts as a major barrier but is more of a psychological hurdle than a significant one.
The Bank of Japan is facing challenges, and any intervention may only attract more inflows due to the attractiveness of cheap British pounds. The Japanese yen may benefit from other countries cutting interest rates, but this is not a widespread trend yet. As long as the interest rate situation remains favorable, the GBP/JPY pair continues to be a preferred trade with no immediate signs of change.
In conclusion, the GBP/JPY pair remains a favorite trade for many traders, and the current interest rate dynamics support a long position. The outlook for the pair is positive unless there are major shifts in global interest rate policies.