The GBP/JPY pair is experiencing a pullback as speculation of intervention strengthens the Japanese Yen. This comes even after strong UK GDP data showed a 0.3% increase in November, surpassing the expected 0.1%. Technical analysis reveals that GBP/JPY is generally in an upward trend, but momentum is slowing after reaching overbought levels. The 21-day and 50-day SMAs suggest a positive outlook. If the pair rises above the 214.00 level, it could move further toward 216.00.

MACD and RSI Indicators

The MACD shows decreasing bullish momentum with the histogram just below zero. The RSI is around 62, indicating a step back from overbought conditions but still remains positive overall. In terms of currency movement, the British Pound has weakened against most major currencies, except for a gain against the Euro. The Pound saw the most decline against the Yen, with a notable change of 0.32% in the currency pair. This data highlights the mixed performance of the Pound against major currencies. Key levels and technical indicators indicate a fading bullish momentum in GBP/JPY amidst market speculation. Although the long-term uptrend in GBP/JPY is still present, there are clear signs that the upward momentum is slowing. The pair is retreating from overbought conditions, suggesting that a phase of consolidation or deeper correction may be ahead. Traders should be cautious about pursuing new highs around the current level of 212.35.

Risks and Opportunities

The main risk for long position holders is the increasing discussions about intervention from Japanese officials. Remember how the Ministry of Finance intervened in 2022 when the yen weakened past 150 against the dollar. Since GBP/JPY crossed the 210 mark late last year, verbal warnings have escalated. Buying out-of-the-money puts can be a cost-effective way to protect against a sudden drop due to official actions. Regarding the UK economy, the Pound isn’t receiving strong support. Although November’s GDP saw a small uptick, the final Q4 figures released last week showed a meager growth of just 0.1%, and December’s inflation report indicated core prices stubbornly high at 4.5%. This stagflation limits the Bank of England’s options and restrains the Pound’s potential. Given this situation, using options to define risk over the next few weeks makes sense. With potential volatility on the rise, strategies like buying a put spread targeting a move toward the 50-day moving average near 208.20 could be appealing. For those still bullish, selling cash-secured puts below key support levels might be a way to earn premium while waiting for a more favorable entry point. It’s important to keep an eye on the upcoming inflation data from both countries and watch for any changes in tone from central bankers. The Bank of England’s policy meeting on February 5th will be a crucial moment for the Pound. Any signs of a less aggressive approach could easily push the pair down to test initial support around 211.30. Create your live VT Markets account and start trading now.

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