GBP/JPY Forex Signal: BOJ Intervention Sparks Bounce

Potential signal:

• A small long here is interesting to me, with a stop at 214.75 and a target of 216.

The British pound initially tried to rally on Thursday but gave up gains pretty quickly.

GBPJPY

The British pound initially tried to rally a bit during the trading session on Thursday against the Japanese yen but rolled over as the Bank of Japan had intervened. That being said, it's not necessarily the British pound that they care about; it's the US dollar, but there is a knock-on effect, and that's exactly what we had seen. Ultimately, this is a market that I think continues to see a lot of volatility, and with that, I think you have to be very cautious with this currency market, but if you end up trying to find some type of position to enter, you should do so slowly because, quite frankly, volatility will continue to be a problem.

That being said, one thing that will help is the fact that the interest rate differential favors you so much, and, of course, it's worth noting that we are already starting to see the market at least attempt to recover. Over the longer term, I still believe that the Japanese yen is in serious trouble, and I do think that the British pound rallies significantly against it before it's all said and done. The markets will continue to look at this through the prism of trying to find value, and I think they will, in fact, find value quite often every time we drop.

Ascending Triangle Pattern and Long-Term Value Focus

On a longer-term time horizon, I see that the Japanese yen will probably shrink considerably, and it would not surprise me at all to see the British pound eventually find its way toward the 225-yen level, but it will take a bit of time to get there. I don't have any interest in buying the Japanese yen, and I believe that we continue to see plenty of upward momentum, in which longer-term traders start to focus on the idea that we are forming an ascending triangle.

If we were to break down below the 214-yen level, ostensibly the 50-day EMA, that opens up a move down to the 212-yen level over the longer term. I think it may be difficult to get beyond it, but we could even drop all the way down to the 210-yen level, which I think would be met by significant support as the 200-day EMA sits there.

If we can break above the 217-yen level, then we're free to go much higher, and I think that happens given enough time. We've seen the Japanese yen lose some of its strength, but right now, we have to ask questions as to whether or not the liquidity on Friday will be worth bothering with, as the Americans will be away on holiday. Nonetheless, this is a bullish market. I have no interest in trying to fight the trend, and I think it's probably only a matter of time before we go much.