Created on December 24, 2025

• The British pound has pulled back ever so slightly during the trading session here on Tuesday, only to turn around and rally against the Japanese yen.
• What I find interesting about this is I’m seeing the same pattern everywhere, so I think this has more to do with the yen than the pound, although the pound is stronger against the US dollar.

Ultimately, breaking above the recent 209 yen level was a very strong sign as to where we are going next. As the Bank of Japan tightened rates a bit, the bond market is up in arms and suggesting that they can only do so much. With that being said, and the interest rate differential coming into focus here, I do think you continue to see a big move to the upside.

Short-term pullbacks continue to be buying opportunities

Short-term pullbacks continue to be buying opportunities, and it’s really not until we break down below 208 yen that I would consider stepping back and staying away from the pair. I don’t have any interest in shorting this pair anytime soon, and quite frankly, if I were to buy the yen, it would be against lower-yielding currencies if we saw a major trend change, for example, maybe short the Swiss franc against the yen.

With all of this being said, I do think that the upward target is probably somewhere closer to the 214 yen level over the next several weeks. I do recognize that the lack of liquidity coming in the next few days will continue to be a bit of an issue, but it can also provide an opportunity. For example, you may have traders looking to take some profit out of the market, and that could send this market down for a day or two, and it could give you an opportunity based on that alone.

Another thing that can happen this time of year is maybe the lack of volume makes for erratic moves, so if you are already long of this market, you may have traders who are short trying to cover, and it can cause a spike. Either way, no matter what, at this point, there’s only one direction I’m looking to trade in this market, and that is with the positive currency swap to the upside.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.