The GBP/JPY exchange rate has recently hit a new high for the year, staying steady around 207.00. The technical outlook looks positive, as the price remains above important moving averages and finds immediate support at the psychological level of 205.00. Momentum indicators, like MACD and RSI, support the bullish trend and show no signs of slowing down. The MACD line is above the Signal line, while the RSI sits at around 66, indicating strong positive sentiment without entering overbought territory.

Short Term Trend Outlook

In the short term, the GBP/JPY trend remains strong as long as it stays above the 21-day Simple Moving Average (SMA). Key support levels include 203.70 for smaller pullbacks and 200.66 for deeper support. If the price goes above 207.00, it could lead to the 207.50-208.00 range. The Japanese Yen is under pressure due to concerns about Japan’s economy and uncertainty over when the Bank of Japan will raise rates. Factors affecting the Yen include the Bank’s policies, differences in Japanese and US bond yields, and general market sentiment. The Yen is often seen as a safe haven, usually strengthening during market stress due to its stability. The strong upward movement in GBP/JPY suggests more gains are likely soon. The price is holding near 207.00 after reaching a new high, indicating that buyers are still in control. This positive outlook is backed by the fact that the pair is trading well above all significant moving averages.

British Pound Strength and Japanese Yen Weakness

The British Pound is gaining strength from the recent Autumn Budget, where the Office for Budget Responsibility raised its GDP growth forecast for 2026 to 1.8%. With UK inflation for October 2025 at 2.9%, the Bank of England is expected to keep its strict policies, which supports the Pound. This is a stark contrast to late 2022 when policy changes caused major volatility. Meanwhile, the Japanese Yen is hampered by uncertainty about the Bank of Japan’s policy timing. The interest rate gap remains significant, with the 10-year Japanese government bond yield at just 0.9%, while UK gilts are over 4.2%. We don’t anticipate this gap to shrink until the Bank of Japan signals a more aggressive rate hike, something the market doesn’t expect until mid-2026. For derivative traders, buying GBP/JPY call options could be a wise way to profit from anticipated gains while limiting risk. Focusing on options that expire in early 2026 allows time for trades to play out, especially if we break through recent highs and target the 208.00 range. Current positive market sentiment, similar to the risk-on environment of late 2024, also undermines the safe-haven Yen. The 205.00 level is a crucial psychological support to monitor closely. A dip to this level might present a good buying opportunity, but a strong break below it would signal that bullish momentum could be fading. This level is also a sensible area to set stops for futures positions or to rethink option strategies. Any pullbacks should be seen as buying chances as long as the overall trend is intact. Selling out-of-the-money put options with strikes near the 21-day SMA at 203.70 could allow for premium collection. This strategy is based on the belief that this primary layer of support will hold, as it has consistently done in recent months. Create your live VT Markets account and start trading now.

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