GBP/JPY today is a weak uptrend with signs of a reversal. The peak of the rates has been fixed at the start of June, and then for 11 weeks, we have been seeing the pound retreating. Investors preferred the safe Japanese yen. Why is one of the most expensive currencies in the world getting cheaper for the third month in a row and does the pound have a chance to regain its position in the foreseeable future? Looking for answers in this review.
A month ago we talked about the need to sell the pound while it is still at its peak. Those who followed this advice made a decent profit. Our forecast for the pound is a further decline, especially against the Japanese yen, because the closer the end of the year as sooner approaches the most difficult crisis period, when the economies of Europe will be under maximum pressure. No one is going to end the military conflict with Russia, which means there are no geopolitical prospects for improving the economic situation in the region. If everything remains as it is, then perhaps next year the UK will simply have nowhere to sell its goods and services, because there will be no money in the EU to buy them.
So far, according to economic indicators in the UK, not everything is so bad: unemployment is low, business activity is above 50 pip, but everything can change very quickly. According to forecasts, inflation will accelerate to a record 13%, and gas prices in the UK have increased 3 times, which will make a large number of enterprises unprofitable - from industrial giants to bakeries and restaurants. For some time, the Bank of England will be able to hold the pound due to an increase in interest rates, but this will not be enough.
The economy is already on the verge and we see the first signs according to the latest macroeconomic reports: a drop in retail sales, a 3% decrease in wages in the 2nd quarter, and soon millions of Britons will have to decide whether to heat their homes or buy food. Under these conditions, the fall of the pound would be obvious.
In Japan, of course, inflation is also growing, but it is +1.8% against 10% in the UK. Of course, for Japan, this is still high inflation, which has not been achieved for many years, and yet. If the Bank of Japan had gone for an increase in interest rates, the JPY would be one of the strongest currencies today. But they hadn't somehow.
Next week will be more volatile for GBP/JPY. We will find out the unemployment rate in Japan, and according to forecasts, unemployment should decrease by 0.1%; industrial production volumes for July, and we are waiting for the PMI manufacturing index from the UK. Most technical analysis tools indicate the effectiveness of the deals to Sell. It seems that we will have a real trend reversal and now is the time to open new deals at its beginning. Therefore, we continue to sell the pound.
