The GBP/JPY currency pair has recovered significantly, rising above 203.00 after a low of 201.85 on Friday. Political uncertainty in Japan is impacting the Yen’s value. The GBP/JPY is trying to break through the resistance level of 203.50, which could indicate a trend change. In technical terms, the Pound found support near the 38.2% Fibonacci retracement level just below 202.00. The 4-Hour RSI has risen above the crucial 50 level, and the MACD is gaining strength, hinting that bearish pressure may be lessening. For bulls to confirm a trend change, they need to push past 203.50. Resistance levels afterward are at 204.55 and 205.20.

Immediate Support Levels

Immediate support is at 201.85, with deeper support found at the 50% and 61.8% Fibonacci retracement levels at 201.35 and around 200.30, respectively. Meanwhile, the Japanese Yen is showing weakness against major currencies, particularly against the New Zealand Dollar. The Yen has declined by -0.23% against the US Dollar and -0.18% against the British Pound. The currency heat map illustrates the Yen’s performance against major currencies, showing varying strengths and weaknesses. Overall, the Yen faces pressure today. Our immediate focus is on the 203.50 resistance level in GBP/JPY. If this level is consistently broken, it would indicate a bullish trend shift, making it a good trigger for call options. This level will likely influence the pair’s direction for the remainder of October. The Yen’s decline is partly due to political turmoil in Japan, following the Komeito party’s exit from the ruling coalition. Similar instability occurred in the late 2000s, often leading to policy paralysis and a weaker yen. Recent polls show public approval for the new government is below 30%, implying continued pressure on the currency.

Market Factors Influencing Yen

We also need to consider the broader market sentiment. Rising US-China trade tensions are pushing gold prices towards record highs near $4,100. In a global risk-off environment, the Yen usually strengthens as a safe-haven asset, creating conflict with its domestic political issues. The VIX index, a measure of market fear, has surged over 40% in the past month, climbing back above 22 and highlighting widespread market anxiety. Given these opposing factors, we think implied volatility in GBP/JPY options is currently undervalued, presenting an opportunity. A long straddle strategy—buying both a call and a put option at the same strike price—could be effective. This position can profit from significant price movements in either direction, likely to occur when either political or global risk narratives take the lead. However, if the resistance at 203.50 holds, we should prepare for a bearish move driven by global safe-haven flows. In that case, we would consider buying put options targeting support levels around 201.85 and then 201.35. A failure to break through this key resistance would suggest that concerns about trade wars are currently outweighing Japan’s internal political struggles. Create your live VT Markets account and start trading now.

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