The GBP/JPY pair is trading around 203.16, mainly because the Yen has weakened. This decline followed comments from Japan’s Prime Minister, Sanae Takaichi. The pair is eyeing resistance levels at 204.00 and 204.28, with a chance to reach the yearly high of 205.32 if these are exceeded. The RSI indicator points to ongoing upward movement; however, if it falls below 202.45, it could drop towards the support zone at 201.35. The Pound Sterling has risen by 0.31% against the Yen due to the Yen’s overall decline. Prime Minister Takaichi’s support for a weaker Yen aims to boost Japan’s economy, even though it could lead to inflation. On the technical side, GBP/JPY is on the rise, eyeing the next resistance levels at 204.00 and 204.28, and possibly the peak of 205.32 for the year. ### Market Outlook for GBP/JPY If GBP/JPY goes below the neutral RSI level of 50, we could see a downward movement. A drop below the 20-day SMA at 202.45 could push the pair toward the 50-day SMA at 201.35. A recent currency table reveals that the Japanese Yen is underperforming against major currencies, particularly the US Dollar, which has changed by -0.53%. With the new Prime Minister favoring a weaker currency, the Yen’s decline will likely be the key driver for GBP/JPY in the short term. This policy approach is similar to the early days of “Abenomics” in the 2010s, which led to a long period of Yen depreciation. Recent data backs this up, as Japan’s core inflation for October 2025 remains high at 2.9%, giving the government reasons to focus on economic stimulus rather than combating inflation. For derivative traders, this outlook leans towards bullish strategies for the GBP/JPY pair. Buying call options with strike prices just above the 204.00 resistance level is a smart way to take advantage of further gains. Considering option expiries in December 2025 and January 2026 would allow enough time to benefit from the expected rise towards the yearly high of 205.32. ### Potential Market Risks Nonetheless, risks from the UK should be considered. The Bank of England has hinted at a possible rate cut in December 2025 to support a slow economy, which could limit any gains for the Pound. UK GDP growth for the third quarter of 2025 was only 0.2%, heightening market expectations for relaxed monetary policy. This mixed situation—weak Yen versus a potentially weak Pound—suggests that volatility may rise. We’ve already seen one-month implied volatility for GBP/JPY increase to 11.5% this week, making options pricier but also more valuable. A bull call spread could be a wise strategy to explore the upside while keeping costs in check and defining risks. As a protective step, we should monitor the 202.45 level closely. A clear break below this support might indicate that upward momentum is fading. In that case, buying put options with a strike around 202.00 could provide a safeguard against a sudden drop towards the 201.35 mark. Create your live VT Markets account and start trading now.

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