Market Analysis

The British Pound has been falling since it reached 206.30 in early October. Right now, prices are moving within a downward channel, and the market seems uncertain. The pair previously faced resistance around 203.00 and is currently testing a support level at 202.00. Recent news from Japan has weakened the Yen, but the Pound has remained steady due to worries about UK’s financial policies. Technical analysis indicates that if the pair drops below 202.00, it might fall further to the channel bottom near 200.90. However, a rise above 203.00 could change this downward trend. The 4-hour chart currently shows a bearish outlook. The Relative Strength Index (RSI) is around 50, with recent lower peaks and troughs favouring sellers. Today, the Japanese Yen gained strength against the British Pound, as illustrated in the currency heat map. Percentage changes in major currencies show that the Yen performed best against the Pound today. The table provides percentage changes, with the base currency on the left and the quote currency at the top. For example, you can find JPY’s changes against USD by checking across the row. The Pound-Yen pair is continuing its correction within a downward channel formed since early October. The price is testing the 202.00 support level, and the market’s uncertainty suggests that sellers have a slight edge. This indicates that, for now, the easiest path for prices is downward.

Factors Impacting the Currencies

The Pound is under pressure due to renewed concerns about the UK’s fiscal conditions. Recent figures showed that public sector net borrowing for September 2025 reached a surprising £18 billion. This concern evokes memories of the market chaos during the 2022 mini-budget crisis, making investors hesitant to purchase Sterling. As a result, the Pound struggles to gain even against a weaker Yen. Conversely, the Yen is weak largely because of the new government’s dovish approach, which is likely to keep the Bank of Japan’s ultra-loose monetary policy. Japan’s latest CPI data for Q3 2025 indicates inflation remains at 1.8%, just shy of the central bank’s target, giving them little reason to raise interest rates. This ongoing policy divergence with the Bank of England, where inflation is still at 3.5%, explains why the pair has risen for much of the last two years. Given the bearish technical pattern, traders might consider buying put options with a strike price near 201.00, targeting the channel bottom around 200.90. These positions could become profitable if the 202.00 support level decisively breaks in the upcoming weeks. The implied volatility remains moderate, making this a budget-friendly way to prepare for further declines. For traders with current long positions, a clear break below 202.00 should serve as a serious warning. To manage this risk, using out-of-the-money call options with a strike price above the 203.50 resistance level can act as a hedge. This strategy would safeguard against losses while allowing for gains if an unexpected rally disrupts the current bearish trend. Create your live VT Markets account and start trading now.

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