GBP/JPY Forecast 07/01: Drifting Lower Against Yen (Chart)

(MENAFN- Daily Forex)

• I am not interested in shorting, as the interest rate differential is simply too great here.
• The British pound initially pushed higher against the Japanese yen during trading on Tuesday, but has since pulled back just a bit.
• All things being equal, this is a market waiting for some type of reason to go higher, and that reason will more likely than not come into play via risk appetite.
• Regardless, this is a market that is very obviously strong, and I have no interest in fighting the overall trend.

The market could end up being a scenario where we just remain buy on the dips and slowly grind higher. When you look at the chart, you can see that the Monday session was a serious attempt to break out of a bullish flag, and if we look at that as a bullish flag, then we could be looking at a move to 216 yen based on the measured move.

EURUSD Chart by TradingViewCarry Trade Momentum

Ultimately, this is a scenario where I don't have any interest in shorting this market because, quite frankly, I don't want to pay the interest rate differential. Even though the Bank of England has recently cut rates, it is going to do so very slowly, while the Japanese are supposedly raising rates.

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The situation is that the interest rate differential is so wide that it's going to take a long time for that to truly come into play. You could also make an argument that most traders believe that the Japanese can only raise rates so high due to their debt load. With that being the case, we find ourselves in, and of course, the overall momentum, I think the carry trade is alive and well, and I will continue to take advantage of it by buying the British pound against the Japanese yen going forward.

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