The JPY weakness narrative has been going on for months as the Bank of Japan delayed rate hikes. However over the past week, the strength has started to trickle back in and it’s not because of the risk off sentiment in the market.
WHY the Yen Story Is Changing
Wage momentum in Japan is heating up, and that’s exactly the trigger the Bank of Japan has been waiting for. Rising wages can cause sticker inflation which can add pressure on the BoJ to start normalising policy.
Also as the Yen weakens the more the Japanese officials are hinting of intervention once again, and when we start hearing rumours of this, it’s time to get a little cautious.
If the JPY does strengthen then we need to identify where we can target in order to take advantage of it. For instance, can we look to trade it with the GBP weakness.
The Bank of England is likely to cut interest rates before the end of the year and if the UK budget is going to see tax increases then it could see further cuts in the future.
GBP/JPY Short?
The price has found resistance at 206.25. If the price doesn’t break and holds below the key level then it could show the momentum is turning.
A supporting low of 204.30 is the low of interest. If this breaks with the confluence of the trendline support then the price could trade lower.
203.00 is a high volume node support, whilst 199.25 is the key support point.
Strategy I Use
If I’m going to trade this move, I need some conditions to come together first.
No guesses. No hope trades. Just structure.
Step 1 — H4 Chart Conditions
I need to see the market form new lows to confirm a change in trend.
If the price keeps making higher lows, the yen story isn’t ready yet.
Step 2 — H1 Trigger Setup
Once I get that shift on H4, I’ll drop to the hourly chart and wait for the 50MA to cross below the 200MA.
Then I want to see prices reject those moving averages.
That rejection is what turns a macro idea into a tradable setup.
If these conditions form? I’ll be actively looking for shorts on GBP/JPY.
If they don’t? I stay patient. The yen doesn’t need chasing when it moves, it moves fast.