GBPJPY: Let's talk about the reasons and targets of growth

FX:GBPJPY   British Pound / Japanese Yen
Conversations about the rate increase by the Bank of England in August put pressure on the GBPJPY pair and push its quotes up. The reason in general is obvious – actual and future growth of the interest rates differential. The Bank of Japan continues to adhere to the ultra-soft monetary policy and does not think to change the course in the foreseeable future. But the Bank of England, in turn raised the stake, and plans to continue doing so. Accordingly, ideal conditions are created for the birth of the carry trade, when the cash flows goes from a less profitable country to a more profitable one. In this case, from Japan to the UK. What in the future will lead to an increase in the pound's exchange rate relative to the yen.

The main obstacle in this direction was and so far, remains Brexit. But judging by the latest statements of the Prime Minister of Great Britain, the Government finally decided on its choice and this is the "soft" Brexit. This option bears minimum damage to the economy of Britain. The actual opening of the pound with a gap up on Monday shows where the British currency will move if this vector of Brexit's solution is implemented. Yes, loud departure of Boris Johnson confused pound bulls (previously retired and left the British Minister for Brexit David Davis), but not for long. Progress in the negotiation process will inevitably push the British currency up.

In this regard, buying a pair of GBPJPY we see a very promising trading idea. The pair, if not today, then tomorrow will reach 148. And although this is a very important level, we believe that it will be taken, and the pair will return to its medium-term range 148-152. Accordingly, the next target will be the upper limit of the range 152. It is also possible that the growth will continue up to 154. All these variants of the development of events are possible even without a serious breakthrough in the negotiation process. But if the EU and Britain will agree, then we can no longer speak of fluctuations within the range, but the formation of a full-fledged upward trend in the pair.
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