Why is the GBP/JPY an important market?
The currency pairing of the British pound / Japanese yen (GBP/JPY) is one of the most traded pairs in the foreign exchange market, representing a significant quantity of daily trading. It's a pairing which is popular amongst veteran traders and newcomers alike.
GBP/JPY trading hours
The forex market is available 24 hours a day, but UK trading, in particular, tends to get active from 8:00 AM and taper off from 5:00 PM. Of course, there will be times during the day when this currency pair experiences higher volumes - typically around major market announcements.
In the following sections, we're going to take a look at the history of the pound and Japanese yen, what factors can influence its movements over time, and why exactly sterling to yen (GBP/JPY) trading remains so popular.
History of GBP/JPY
To begin our overview of the pound and the Japanese yen we're going to explore the history behind both of these currencies.
The pound sterling dates all the way back to around 775. It evolved into its current, modern form following decimalisation in 1971. Currently, it is the fourth most-traded currency across the foreign exchange market and represents a significant amount of daily trades all around the world.
The yen was officially adopted in 1871 by the Meiji government, and as such has a more complex and rich history in comparison to some of the relatively newer currencies around the world. Since inception, the value of the yen has grown considerably and this is, in large part, due to the strong Japanese industrial complex. A thriving industry consisting of technological developments, agricultural innovation, and a range of exportable products have all historically helped the yen.
Japanese yen (JPY) carry trade
The yen carry trade is a phenomenon that occurs when investors borrow yen at a low-interest rate then purchase foreign currency that pays a relatively high interest rate on its bonds. A yen carry trade example would involve borrowing yen and converting it into US dollars in order to profit from US Government bonds. The carry trade is maintained by the famously low Japanese interest rate.
Factors influencing the GBP/JPY
Role of GBP
A significant factor which affects the value of GBP is the overall performance of the economy across the United Kingdom. There are three gross domestic product (GDP) reports which are released, as follows; Preliminary GDP, Revised GDP, and Final GDP. Traders and investors will follow these reports when trying to determine the future movement in the market.
The price of the pound sterling is also impacted by monetary policies enacted by the Bank of England (BOE). Whenever the BOE deem inflation to be rising too quickly they will utilise monetary policy tools to try to control the rise. During these procedures, interest rates can rise, which is another factor that traders consider when analysing the market and possible future direction for the GBP-JPY pairing.
Role of JPY
The Bank of Japan (BOJ) and other financial institutions release regular reports regarding interest rates and other economic data, which traders look towards when trying to determine future price movements. These figures are especially useful for figuring out possible movements in the GBP/JPY exchange rate.
As Japan is such a small country – in comparison to other big players in the foreign exchange market – events such as national and natural disasters can also play a part in affecting (or destabilising) the currency and its rates.
BRITISH POUND TALKING POINTS:
GBP/USD is staging a recovery after sliding to fresh two-year-lows last Thursday.
GBP/JPY has found resistance on a descending trendline as looked at yesterday and, so far, support has held around the 165.00 psychological level, keeping the door open for bullish breakout potential.
GBP/JPY
Longer-term, there’s some remaining bearish potential in here but it appears that we’re at least a few steps away before that theme develops. And I’ll start off with the weekly chart, to really illustrate what we’re dealing with.
The below weekly chart shows extreme indecision over the past few months. In April, prices broke above the 160 psychological level and matters haven’t really been the same since.
On an even shorter-term basis, GBP/JPY is being constrained by a trendline. This trendline is taken from tops in early and mid-June and, so far, has helped to hold the highs. I wrote about this yesterday, highlighting support in the 164.47-165.00 area. That has since held and the door remains open for bullish potential in the pair, with a breach of 166.10 opening the door for a move up to 166.85. And, after that, the double top is exposed around 168.06.
GBP/JPY trading hours
The forex market is available 24 hours a day, but UK trading, in particular, tends to get active from 8:00 AM and taper off from 5:00 PM. Of course, there will be times during the day when this currency pair experiences higher volumes - typically around major market announcements.
In the following sections, we're going to take a look at the history of the pound and Japanese yen, what factors can influence its movements over time, and why exactly sterling to yen (GBP/JPY) trading remains so popular.
History of GBP/JPY
To begin our overview of the pound and the Japanese yen we're going to explore the history behind both of these currencies.
The pound sterling dates all the way back to around 775. It evolved into its current, modern form following decimalisation in 1971. Currently, it is the fourth most-traded currency across the foreign exchange market and represents a significant amount of daily trades all around the world.
The yen was officially adopted in 1871 by the Meiji government, and as such has a more complex and rich history in comparison to some of the relatively newer currencies around the world. Since inception, the value of the yen has grown considerably and this is, in large part, due to the strong Japanese industrial complex. A thriving industry consisting of technological developments, agricultural innovation, and a range of exportable products have all historically helped the yen.
Japanese yen (JPY) carry trade
The yen carry trade is a phenomenon that occurs when investors borrow yen at a low-interest rate then purchase foreign currency that pays a relatively high interest rate on its bonds. A yen carry trade example would involve borrowing yen and converting it into US dollars in order to profit from US Government bonds. The carry trade is maintained by the famously low Japanese interest rate.
Factors influencing the GBP/JPY
Role of GBP
A significant factor which affects the value of GBP is the overall performance of the economy across the United Kingdom. There are three gross domestic product (GDP) reports which are released, as follows; Preliminary GDP, Revised GDP, and Final GDP. Traders and investors will follow these reports when trying to determine the future movement in the market.
The price of the pound sterling is also impacted by monetary policies enacted by the Bank of England (BOE). Whenever the BOE deem inflation to be rising too quickly they will utilise monetary policy tools to try to control the rise. During these procedures, interest rates can rise, which is another factor that traders consider when analysing the market and possible future direction for the GBP-JPY pairing.
Role of JPY
The Bank of Japan (BOJ) and other financial institutions release regular reports regarding interest rates and other economic data, which traders look towards when trying to determine future price movements. These figures are especially useful for figuring out possible movements in the GBP/JPY exchange rate.
As Japan is such a small country – in comparison to other big players in the foreign exchange market – events such as national and natural disasters can also play a part in affecting (or destabilising) the currency and its rates.
BRITISH POUND TALKING POINTS:
GBP/USD is staging a recovery after sliding to fresh two-year-lows last Thursday.
GBP/JPY has found resistance on a descending trendline as looked at yesterday and, so far, support has held around the 165.00 psychological level, keeping the door open for bullish breakout potential.
GBP/JPY
Longer-term, there’s some remaining bearish potential in here but it appears that we’re at least a few steps away before that theme develops. And I’ll start off with the weekly chart, to really illustrate what we’re dealing with.
The below weekly chart shows extreme indecision over the past few months. In April, prices broke above the 160 psychological level and matters haven’t really been the same since.
On an even shorter-term basis, GBP/JPY is being constrained by a trendline. This trendline is taken from tops in early and mid-June and, so far, has helped to hold the highs. I wrote about this yesterday, highlighting support in the 164.47-165.00 area. That has since held and the door remains open for bullish potential in the pair, with a breach of 166.10 opening the door for a move up to 166.85. And, after that, the double top is exposed around 168.06.
Trade closed: stop reached