GBP/JPY increased by over 0.30% to cross the 218.00 mark, buoyed by improved risk appetite concurrent with a general decline of the US dollar after the Fed’s monetary policy adjustments. The pairing is now trading around 218.50, following a low point of 217.16 earlier in the day.
GBP/JPY Price Forecast: Technical Outlook
Despite initially appearing poised for deeper losses after reaching a 10-day low, GBP/JPY changed direction post-Fed decision, aligning more closely with GBP/USD movements.
Current momentum suggests further upward movement, as indicated by the Relative Strength Index (RSI). Thus, the trend seems tilted upwards. However, potential intervention by Japanese authorities in the foreign exchange market could introduce opportunities for downward movement.
If bullish momentum continues, the immediate resistance level is at the psychological mark of 219.00. Beyond that, we have the daily high from July 15, alongside a confluence of levels at 219.57/61, and then the 220.00 target looms ahead.
Conversely, the initial support level stands at 218.00. Should this be breached, it would place the day’s low at 217.16 under threat, leading towards the April 30 high support situated at 216.60. Clearing that could lead to the 50-day simple moving average (SMA) at 215.62 being the next significant level to watch.
GBP/JPY Price Chart – Daily
Frequently Asked Questions About the Japanese Yen
The Japanese Yen (JPY) ranks among the world’s most traded currencies. Its value largely hinges on Japan’s economic performance, but also on factors like the Bank of Japan’s strategies, the disparity between Japanese and U.S. bond yields, and the overall risk appetite of traders.
A key function of the Bank of Japan is managing exchange controls, making their trends crucial for the yen’s valuation. While the Bank sometimes intervenes in currency markets to lower the yen’s value, such actions are not frequent due to political considerations with major trading partners. The ultra-loose monetary policies from 2013 to 2024 widened the gap between Japan’s and other central banks’ policies, resulting in a weaker yen. Recently, however, tapering that stance has provided some support to the yen.
Over the last decade, the Bank of Japan’s prolonged commitment to easy monetary policy has led to a significant policy divergence from central banks like the US Federal Reserve. This situation has contributed to a growing gap between US 10-year and Japanese 10-year bonds, which has favored the strength of the US dollar over the yen. However, this gap has recently begun to close, spurred by the Bank of Japan’s gradual retreat from its ultra-easy policy in 2024 coupled with interest rate cuts by other central banks.
The Japanese yen is frequently regarded as a safe-haven asset. Therefore, when markets face turmoil, investors tend to flock to the yen, as it’s perceived as more stable. In tumultuous times, the yen typically strengthens against other currencies viewed as riskier options.
