- GBP/JPY is expected to trade positively around 198.40 in the early European session on Friday.
- The outlook for this currency pair is optimistic, surpassing the significant 100-day EMA with bullish RSI indicators.
- Resistance levels are seen at 198.85, while the initial support level is 196.95.
The GBP/JPY is poised to hold steady near 198.40 in Friday’s early European trading. The Japanese yen seems to be weakening compared to the pound sterling, likely due to a better risk sentiment in the market.
From a technical perspective, the constructive outlook for GBP/JPY is supported by the 100-day exponential moving average (EMA) shown in the daily chart. Additionally, the relative strength index (RSI) is hovering above 65.00, signaling positive momentum in the near term.
On the positive side, the initial resistance appears at 198.85, coinciding with the upper limit of the Bollinger band. A breakthrough beyond this point could trigger further momentum, potentially aiming for the notable psychological level of 200.00. The next resistance level up north will likely be at 200.75 on May 28, 2024.
Conversely, for bearish outlooks, the first support level stands at 196.95, last observed on June 24. A drop below this could pull the currency pair down towards 194.34, noted on June 18.
GBP/JPY Daily Chart
Japanese Yen Questions
The Japanese Yen (JPY) is among the most traded currencies globally. Its value largely depends on the performance of the Japanese economy, but it also hinges on the policies of the Bank of Japan, differences in bond yields between Japan and the US, and traders’ risk sentiment, among other factors.
The Bank of Japan plays a key role in currency control, impacting the yen’s movement significantly. While the BOJ has intervened in the currency market to lower the yen’s value, they tend to hesitate due to political implications with trading partners. Following years of ultra-loose monetary policy from 2013 to 2024, policy differences emerged, leading to a depreciation of the yen compared to major currencies, though some support has returned recently.
The BOJ’s adherence to ultra-loose monetary policy has widened the gap with other central banks, particularly the US Federal Reserve. This has contributed to a growing disparity between US and Japanese bonds, thus affecting the USD/JPY exchange rate. The decisions made by the BOJ in 2024, coupled with interest rate cuts from other central banks, are beginning to narrow this gap.
The Japanese yen is often regarded as a safe-haven currency. During turbulent market conditions, investors tend to flock to the yen for its perceived reliability and stability, potentially boosting its value compared to riskier currencies.
