- GBP/JPY surged after the UK budget was released, with traders embracing renewed pound strength while the yen remained broadly weak.
- The uptrend stays firmly in place, and pullbacks appear to offer potential buying opportunities despite upcoming low-volume holiday trading.
The British pound has rallied significantly against the Japanese yen during the trading session on Wednesday as the UK budget has come out, and evidently, everybody likes it. So, at this point in time, it looks like we are breaking to much higher levels given enough time, perhaps trying to get to the 208.50 level. And short-term pullbacks I think continue to offer buying opportunities. The Japanese yen had a tough day regardless, and this, of course, was one of the more explosive pairs as it typically is.
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Support Levels and Carry Dynamics
The 205 yen level underneath, I think, is significant support, and breaking down below that could open up the possibility of a drop all the way down to the 50-day EMA at 202.6 yen. All of that being said, this is a market that's been in an uptrend for quite a while, and I think that will continue to be the case. Keep in mind that you get paid to hang on to this pair despite the fact that the Bank of Japan is talking about tightening monetary policy. The reality is they probably won't, and they certainly won't as long as the Bank of England can maintain its rates, even though England is likely to cut rates a bit. The entire interest rate differential between the two currencies will continue to be a major driver as the yen loses strength across the board and the British pound continues to at least show signs of life.
I think you've got a real opportunity here for a longer-term buy-and-hold type of scenario. Keep in mind the next couple of days are Thanksgiving in the United States, so they won't exactly be voluminous days, but they are days that the Europeans and the Asians will, of course, move this pair around. It's clear to me that the buyers have made a statement at the end of the day.
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