Forex Trading: GBP/JPY Rallies On Yen Selling

As we had suggested during yesterday’s commentary, the seemingly overdone Sterling selling and Yen purchasing might have come to an end, or at least a brief pause. Looking at where we began the Asian session (refer to the link above) yesterday, we see the GBP/JPY pair rallied almost 7 big figures. The rally ensued as Europe began its trading day and the highs were reached on the 50 basis point ease, as markets are reacting postively to lower rates and stimulus.

This however is not the whole story as more speculation about the Bank of Japan intervening on the Yen in order to depreciate the currency and provide a boost to its slumping exports, has helped the Yen sell off and the combination of the two has led to this rally. But the question remains is the party over? Perhaps not just yet.

Looking now at a daily retracement on the pair we see it trading between the highs and the 23.6% retracement as the pair had a pull back during NY trading with some profit taking. The highs might not be enough now to hold the pair in the short-term as recent price action at higher levels seem to be within reach. We will look for the 50 day moving average to provide some resistance as well as yesterday’s highs, but a break could be as violent as yesterday’s, particularly if more speculation of BOJ intervention come down the pipeline. Stay tuned.

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