GBP/JPY slipped 0.11% to around 208.80 in European trading on Monday. The Japanese Yen strengthened after the US Supreme Court ruled against President Donald Trump’s tariff policy. That decision increased demand for safe-haven assets.
The Yen also rose as markets priced in a possible Bank of Japan rate hike in the near term. The Pound stayed mostly firm after strong UK data.
February 2025 Market Backdrop
UK Retail Sales for January rose 1.8% month-on-month, up from 0.4% in December. The flash S&P Global UK Composite PMI for February climbed to 53.9 from 53.7, beating forecasts of 53.4.
Traders are watching comments from Bank of England MPC member Alan Taylor, who is speaking in a fireside chat at Deutsche Bank. Taylor was one of four members who voted for a 25-basis-point rate cut.
On the chart, price is below the falling 20-day EMA at 210.18. The 14-day RSI moved back above 40.00 after trading in the 20.00–40.00 range.
If the pair breaks below the 17 February low of 207.24, it could test the 5 December low of 206.20. The analysis note says an AI tool helped write the technical section.
Options Strategies Considered
Looking back to February 2025, GBP/JPY was pulled in two directions. The Yen strengthened on safe-haven demand after the US Supreme Court’s tariff ruling, while strong UK data supported the Pound. The UK Composite PMI reading of 53.9 stood out, as it extended a late-2024 pattern of resilience in the services sector.
The main support for the Yen was the growing belief that the Bank of Japan (BoJ) would shift policy. Markets were pricing in a high chance the BoJ would end its negative interest rate policy by April 2025. This view was reinforced by Tokyo core inflation staying above the 2% target for more than a year. These expectations helped push GBP/JPY lower.
At the same time, solid UK retail sales and PMI data helped limit the downside and reduced the risk of a sharper drop. Even so, caution was warranted ahead of comments from the dovish Alan Taylor. Any signal of more rate cuts could have weakened the Pound and matched the bearish technical setup.
With the falling 20-day moving average acting as resistance, selling rallies toward 210.00 looked attractive. For derivatives traders, a simple approach was to buy put options with a strike near 207.00, expiring in late March 2025. This positioned traders for a move toward 206.20 while keeping the maximum risk clear.
Another approach was a bear put spread to reduce upfront cost, which made sense given the Pound’s underlying support. This meant buying a put around 208.00 and selling a lower-strike put, such as 206.50. The goal was to profit from a moderate decline in the pair over the following weeks.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
