GBP/JPY has recently decreased from its one-year high of 199.83, which is the highest point since July 2024. This drop is due to profit-taking and technical corrections, alongside a stronger Japanese Yen reacting to US tariff threats and weak wage data. Currently, GBP/JPY is trading around 198.90, showing a slight decline of 0.17% during American trading hours. Japan is under increased pressure from US tariffs, while the UK has recently secured a trade agreement with the US, leading to reduced tariffs on important exports.

Technical Performance

From a technical standpoint, GBP/JPY remains in an upward channel, experiencing a slight pullback after almost reaching the 200.00 mark. The pair is still above the key 21-day EMA at 197.16, a support level that has been in play since May. Momentum indicators suggest a stable trend, with the RSI close to 60 and the MACD showing strong bullish momentum. If the pair closes above 200.00, it could indicate further gains. However, a drop below 197.00 might trigger a pullback to support levels around 194.50 to 195.00. Today, the Japanese Yen strengthened against major currencies, gaining 0.38% against the Canadian Dollar. This showcases the Yen’s solid performance in the currency markets. As GBP/JPY pulls back modestly after approaching the important 200.00 level, the spike to 199.83 seems to have faced resistance both from technical barriers and inflows into the Japanese Yen. This isn’t a major directional change but rather a pause in the upward trend, as long positions take time to secure profits after the pair’s rise since early May.

Broader Market Dynamics

The larger market influences remain important. US tariffs have dampened sentiment regarding the Japanese economy, increasing demand for the Yen as a safe haven. Meanwhile, the UK-US tariff agreement has provided support for the pound, helping stabilize potential declines, even if it hasn’t driven the currency to new highs. Closing positions from traders likely contribute to the current cooling at these levels. Nevertheless, the upward trend remains intact. The price action stays comfortably above the 21-day moving average of 197.16, which has consistently provided short-term support. This suggests that if the pair maintains this level, momentum buyers are likely to return. A sustained move back to 200.00 could attract new interest, especially from traders focused on volatility. In the wider Yen context, today’s gain against the Canadian Dollar indicates that short Yen positions are being strategically unwound, possibly due to weaker Japanese wage figures. Past trends show that fundamental releases that don’t enhance risk appetite tend to support the Yen through safe-haven buying, and today reflects that pattern. While the RSI remains below overbought levels, it is trending upward, indicating that buyers are still active, although at a slower pace. The MACD continues to favor upward scenarios and shows no credible divergence. Moving forward, price action may be more compressed unless major macro headlines disrupt market sentiment. From a strategy perspective, there is currently little motivation to aggressively rebuild short Yen positions, considering central bank differences and uncertain geopolitical situations. However, the prospect of a close above 200.00 could ignite further momentum, presenting opportunities for trend continuation and significantly changing sentiment, especially among traders responding to breakout patterns. While a drop toward the 197.00 level is possible, our analysis suggests that the risk of capitulation above that level is diminishing, unless there are significant shifts in Japanese policy. If such changes occur, particularly regarding currency stabilization efforts, a swift reevaluation would be necessary. For now, it is wise to maintain balanced exposures, watch how the pair behaves around the 198.00 level, and stay alert to macro signals. This approach leans towards being prepared for either sustained consolidation or a renewed upward movement. Create your live VT Markets account and start trading now.

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