The Japanese Yen has weakened considerably as a result of Bank of Japan’s (BOJ) policy of “the maximum scale of stimulus possible.” Since the stimulus package the yen has been weak against most major currencies. However, with the announcement that the central bank will not be implementing any further easing, the yen has made a small revival. By contrast, with the U.K. general elections scheduled for May, some volatility is expected in Sterling in the run-up. Further uncertainty is expected with the potential for U.K. exiting the European Union. With a huge budget deficit, the U.K. still has a way to go before making a full economic recovery. Given these contrasting fundamentals, there are considerable long-term investment opportunities in the GBP/JPY.
Investors Notes:
- Japan has regained some competitiveness in export demand through the subsequent weakening of the Yen.
- The U.K. is still suffering from the fall in demand from one of its biggest trading partners, the Eurozone.
- From a technical perspective, there is significant weight in the downward channel, with considerable selling pressure on the GBP/JPY currency pair.
- A bearish crossover in MACD, coupled with the recent breakthrough of a head and shoulders pattern confirms the bearish momentum.
- Banc De Binary analysts predict that the downward trend will continue, indicating a potential long-term downward movement in the GBP/JPY.