There is a very interesting seasonal pattern approaching in the GBPJPY pair. Recent gains in the pound are starting to look stretched. The Bank of England has been hiking interest rates to deal with rising inflation and that’s resulted in a stretched long position in the CFTC report. However, the impact of these rising interest rates is now starting to be felt in the UK economy. Retail sales have recently fallen in the UK. The housing market is now in one of the weakest places it’s been for the last 12 years. Therefore, the Bank of England may be more hesitant to hike interest rates now and feel that a lot of the banks’ work has been done.

In contrast, the Bank of Japan may still need to exit its yield curve control policy, and maybe even start raising interest rates. The weakness in the yen is of concern politically in Japan, and the Ministry of Finance could intervene and strengthen the yen at any point. Therefore, pound yen selling does make sense from a fundamental macro perspective.

Seasonally, the GBPJPY has a very weak period with over 85% falls around the 20th of September to the 8th of October for an average fall of 2.16%. So, is the GBPJPY now ready to fall?

Major Trade Risks: The biggest risk here is that the monetary policy outlook from the Bank of England and the Bank of Japan changes.

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