GBP/JPY has fallen to a two-week low of about 200.68, as the British Pound struggles due to concerns about UK finances and expected rate cuts. If it drops below 200.00, it could aim for 198.87, which would close an October bullish gap. In technical terms, GBP/JPY is at a critical point near 200.00, where it aligns with the 50-day Simple Moving Average and past horizontal support. If the price strongly closes below this level, it might signal a bearish reversal, forming a double-top pattern.

Support and Resistance Levels

If GBP/JPY moves below 200.00, it could pull back to October’s high of 198.87, with more support at 197.50. Resistance is near 202.16, which is the 21-day SMA; if it breaks above this, the pair might test 204.00 again. Recent momentum indicators show a weakening trend. The RSI is around 44.8, suggesting bearish sentiment. Meanwhile, the MACD shows a new bearish crossover, with its histogram in negative territory. The Bank of Japan (BoJ) will make a policy decision on Thursday that could increase volatility, with rates expected to stay the same. Today, the GBP rose against the Swiss Franc but weakened against other currencies, as shown by various percentage changes in the heatmap.

Market Dynamics and Strategy

The GBP/JPY pair is under considerable pressure as it approaches the crucial 200.00 support level. This point serves as the neckline for a possible double-top pattern, a classic indication of a bearish reversal. A strong break below this zone in the coming days could confirm a shift in market momentum downward. Concerns regarding the UK’s fiscal health are growing, especially after data from the Office for National Statistics for September 2025 indicated that government borrowing exceeded expectations again. Additionally, recent UK CPI data showed a slight decline at 3.1%, which is leading markets to anticipate a higher chance of a Bank of England rate cut in early 2026. This outlook on monetary policy is putting further pressure on the Pound. Conversely, the Bank of Japan is likely to maintain a cautious approach and keep rates steady this week. The BoJ remains reluctant to tighten its policy aggressively, having only ended its negative interest rate policy at the beginning of 2024. This divergence between a potentially dovish BoE and a neutral BoJ supports a weaker outlook for GBP/JPY. Considering this situation, it may be wise to prepare for a downward move, especially if there is a daily close below the 200.00 mark. Buying put options with strike prices around 199.00 or 198.50 could help take advantage of a possible drop toward the 198.87 target. Another option would be to short futures contracts to express this bearish view. However, it’s important to manage risks because this pair can be very volatile. If it rises above the 21-day SMA at 202.16, it would invalidate the bearish outlook, and that level could serve as a stop-loss point. If resistance is broken, it may be necessary to quickly exit short positions and consider call options to hedge against a move back toward 204.00. Create your live VT Markets account and start trading now.

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