• The GBP/JPY experienced a slight pullback against the Japanese yen during Thursday's trading session, despite the Bank of England's decision to raise interest rates by 25 basis points.
• This move was widely expected and therefore did not come as a surprise to the market.
• However, we are already witnessing a turnaround in the market, indicating that it is only a matter of time before we reach new highs.
• This market has been characterized by a "buy on the dip" mentality, which is likely to persist in the future. Ultimately, the market is likely to set its sights on the significant psychological level of ¥170, which will undoubtedly attract considerable attention from traders.

Beneath the current price action, there is a hammer formation around the ¥168 level, which serves as a short-term support level that many traders will closely monitor. A break above the ¥171 level would open the possibility of a move towards the recent high of around ¥172.50. If this level is surpassed, the market could potentially reach as high as ¥175, which is the longer-term target for this market.
 

Selling this Market is Not Advisable

However, in the event of a breakdown below the ¥167.50 level, particularly below the low of the hammer formation, the market could decline toward the 50-Day Exponential Moving Average (EMA) located near the ¥166 level. This scenario would align with technical analysis, further reinforcing the potential support level. All things considered, this is a market that continues to attract buyers, but it does not imply that it will be without noise and challenges at times. Nonetheless, selling this market would not be advisable, as its overall strength remains intact. The substantial interest rate differential between Great Britain and Japan is likely to persist if the Bank of Japan maintains its yield curve control policy.

To summarize, the British pound experienced a minor retreat against the Japanese yen despite the Bank of England's interest rate hike. However, the market has already shown signs of a rebound, indicating a potential return to new highs. The "buy on the dip" approach remains prevalent in this market, with the ¥170 level serving as a key target. Short-term support can be found around the ¥168 level, while a break above ¥171 would open the door for further upward movement. Selling this market is not advisable given its overall strength and the interest rate differential between the two countries. If the Bank of Japan maintains its yield curve control policy, this interest rate gap is likely to persist.

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