On Tuesday, the pound/yen pair saw a slight increase, attributed to the continuing depreciation of the Japanese yen (JPY). The influence of Japanese government intervention has lessened, shifting focus back to rising tensions in the Middle East. At that moment, the Cross was trading around 213.90, marking nearly a 0.53% climb for the day.
The yen is still feeling the strain as surging oil prices elevate concerns over Japan’s import expenses. Both Japan and the UK rely heavily on energy imports, but Japan’s dependence on routes through the Strait of Hormuz makes it particularly sensitive to fluctuations and tensions in that region.
At the same time, the cross benefits from the significant interest rate gap between the Bank of England (BoE) and the Bank of Japan (BoJ). With fears of inflation spurred by oil prices, expectations are rising that central banks may need to tighten their policies to manage these price pressures.
Although the Bank of Japan is on a path of gradual tightening, worries regarding economic growth from the energy crunch could complicate the overall policy picture. Traders seem to be anticipating at least two interest rate hikes before the year wraps up, which would likely encourage the central bank to maintain a yield differential that favors the British pound (GBP).
Technical analysis:
From a daily perspective, GBP/JPY stays above both the 100-day simple moving average (SMA) and the 200-day SMA, indicating a generally positive trend. The placement of prices against these averages suggests that the broader uptrend is still in play. However, the relative strength index hovering around 50 implies a certain level of indecision about immediate price movement. Furthermore, a negative Moving Average Convergence Divergence (MACD) reading hints that progress may not be smooth in the short term.
If we look at the upside, initial resistance appears at around 214, where a significant break and a daily close above could trigger further advancements in this bullish framework. Conversely, on the downtrend, the 100-day SMA at 212 serves as the first line of support, followed by a horizontal low at 209, and the 200-day SMA down at 206 adds to the overall bullish environment, acting as a deeper support zone consistent with the ongoing trend.
