The pound rose against the yen on Wednesday, increasing by 0.17%, even amid warnings from Japanese officials about possible intervention in the currency market to support the yen. Currently, GBP/JPY is trading at 215.93, reflecting a 0.16% gain.
GBP/JPY Price Forecast: Technical Outlook
GBP/JPY broke out of the 212.00-215.00 range today, paving the way to test higher levels such as the psychological barrier of 216.00 and the year-to-date high of 216.60.
The momentum appears bullish, as indicated by the Relative Strength Index (RSI). However, ongoing vocal intervention from Japanese authorities may restrict GBP/JPY’s upward movement.
If GBP/JPY surpasses the year-to-date high, it could lead to further gains as the pair approaches 217.00. Beyond that level lies the psychological mark of 220.00. Conversely, a strong yen may result in a test of the resistance level that shifts from being a falling resistance to support at around 215.00. Should that break, potential losses could reach 214.50, with the 50-day simple moving average (SMA) at 214.07 following closely behind.
GBP/JPY Price Chart – Daily
Frequently asked questions about the British pound
Pound Sterling (GBP) is the oldest currency in continuous use, having been established in 886 AD, and is the official currency of the United Kingdom. As of 2022, it ranks fourth globally in foreign exchange (FX) trading volume, representing 12% of all transactions with a daily average of $630 billion. The main trading pairs include GBP/USD, often referred to as “cable,” which accounts for 11% of FX, GBP/JPY (3%), nicknamed the “dragon,” and EUR/GBP (2%). The currency is issued by the Bank of England (BoE).
The value of the pound is primarily influenced by the monetary policy set by the Bank of England. Their decisions hinge on achieving “price stability,” targeting an inflation rate around 2%. Interest rate adjustments are the key tool for this. When inflation is high, the BoE may raise rates to control it, making borrowing more expensive. This generally strengthens the pound, as higher rates make the UK attractive to international investors. Conversely, if inflation dips too low, it indicates slower economic growth, prompting the BoE to consider lowering rates to encourage borrowing and investment.
Economic data releases significantly impact the pound’s value. Indicators like GDP, manufacturing and services PMI, and employment figures can sway GBP’s direction. A robust economy is favorable for the pound, as it tends to attract more foreign investment, which might encourage the BoE to raise interest rates, further strengthening the currency. In contrast, weak economic indicators could lead to a decline in the pound.
Another crucial aspect concerning the British pound is its trade balance, which reflects the disparity between earnings from exports and payments for imports over a timeframe. When a country has highly sought-after export goods, its currency benefits from the heightened demand from foreign buyers. Thus, if the net trade balance is positive, the currency strengthens; if negative, it may weaken.
