GBP/JPY Forecast 20/10: Can Pound Break Higher? (Video)

(MENAFN- Daily Forex) The British pound continues to look attractive to me, as we are looking at a Japanese yen that still only offers very little in swap. The 'carry trade' continues to be a driver over the longer term.

GBP/JPY

The British pound has rallied a bit early during the trading session here on Monday as we continue to see a lot of noisy behavior. Quite frankly, this is a pair that I like the idea of buying dips to take advantage of the overall interest rate differential. The interest rate differential, of course, is favoring the British pound and will continue to do so for the foreseeable future.

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Despite the fact that the Bank of Japan has issued a few warnings and even intervened a few times, there's really not a lot to keep this pair down. The Bank of England could possibly cut rates in the next few months, but we're still talking about a massive interest rate differential. With this and the fact that the Bank of Japan is very unlikely to raise rates at the end of the month, I find this to be a market that looks to be trying to find its bottom.

Structurally speaking, from a longer-term standpoint

We have seen lower lows and lower highs, but I also recognize that we see a surge as of late that is now threatening the 200-day EMA as well as the 50-day EMA. In fact, it even touched the 50-day EMA during the session

Breaking above the 200-day EMA does open up the possibility of a return to the upside. We could be looking at a fairly significant move, but in the short term, this looks a lot like a market that is noisy, probably more buy on the dip for short-term traders to take advantage of, hoping for that eventual breakout to the upside.

EURUSD Chart by TradingView

A break below ¥207 would change the overall attitude, but right now we're basically 400 pips from that level.

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