GBP/JPY is currently around 198.00 after bouncing back from a low of 197.50. The Yen has weakened due to Japan’s unemployment rate rising to 2.6% in August, higher than the expected 2.4% and up from 2.3% in July. Meanwhile, the British Pound is struggling to gain traction. The UK Composite PMI fell to 50.1, a five-month low, and the Services PMI dropped to 50.8. After four days of decline, GBP/JPY has stabilized near 198.00, having reached its lowest level since August 7.

Technical Analysis

Technical analysis shows that GBP/JPY is trying to stay above 198.00. If it falls below this level, it may target the previous low of 197.50. Resistance is noted around 198.50, which corresponds with the 21-period Simple Moving Average. Several elements affect the Yen’s value, including Japan’s economic performance, Bank of Japan’s policies, and the differences in bond yields between Japan and the US. The Yen is often considered a safe-haven asset, gaining strength during market uncertainty. Forex trading carries risks, and individuals should conduct personal research before making financial decisions. The information provided is for informational purposes only and does not imply trading recommendations. Currently, GBP/JPY is in a tricky spot, with both currencies showing weakness. The UK’s slowing economy, highlighted by the September 2025 composite PMI dropping to 50.1, impacts the Pound negatively. This situation suggests that option traders might think about selling call spreads above the 199.00 resistance level to anticipate limited upside.

The Economic Outlook

In the Bank of England’s September 2025 meeting, rates were held at 4.75%, but the minutes revealed concerns about the economic slowdown. This dovish sentiment suggests that any rallies in the Pound could be short-lived, presenting selling chances. Traders may view the trend for this currency pair as likely heading downward in the coming weeks. On the Japanese side, the Yen is also struggling. Japan’s unemployment rate recently increased to 2.6%. Additionally, Japan’s core CPI for August 2025 was at 2.7%, cooling from earlier highs but still above the Bank of Japan’s target. This allows the BoJ to proceed slowly in adjusting its loose monetary policies, limiting the Yen’s strength for now. A significant factor to watch is the ongoing US government shutdown, which is raising demand for safe-haven assets. We recall the 35-day shutdown from late 2018 to early 2019 that boosted the Yen significantly against other currencies. If GBP/JPY breaks below the 197.50 support level, it could lead to a sharp decline, making protective put options an appealing strategy to hedge against a quick surge in Yen demand. Create your live VT Markets account and start trading now.

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