(MENAFN- Daily Forex)

• The British Pound initially fell against the Japanese Yen on Friday but rebounded, showing resilience within a volatile range.
• Despite short-term choppiness, the interest rate differential favors further upside, with 205 yen and 208 yen as key resistance levels.

The British Pound initially fell against the Japanese Yen during the trading session on Friday, only to turn around and show signs of life. All things being equal, the market is likely to continue experiencing a lot of volatility, which is typical for this currency pair. The recent pullback and subsequent bounce are both characteristic behaviors.

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With that in mind, the 50-day EMA underneath should be viewed as support for the market. A break below the 50-day EMA could open the door for a move down to the 200-yen level. That being said, this remains a market that I believe will eventually go higher. The 205-yen level has proven to be significant, as we previously pulled back quite sharply from that area.

EURUSD Chart by TradingViewAre We Forming a Range?

The market now appears to be working back and forth within this range, trying to build up enough confidence to move higher. The interest rate differential continues to favor the British Pound, though it's worth noting that the Pound itself has struggled across the broader Forex landscape. Much of the price action will depend on whether traders focus on the weakness of the Yen or the Pound, as both currencies are currently under pressure.

Overall, I believe the interest rate differential will keep this pair biased to the upside. If we can break above the 205-yen level, the next targets would likely be 208 yen and then 210 yen. On the downside, even if the pair drops below 200 yen, there is still considerable support until around 198 yen.

For now, I'm not overly concerned about the downside risk, but I do expect this pair to remain extremely choppy until we see broader, sustained selling of the Yen in the currency markets. That trend will likely be most clearly observed in the USD/JPY pair, which offers the cleanest measurement of Yen strength or weakness.

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