The GBP/JPY pair has climbed above the 210.00–212.00 range as the Japanese Yen weakens due to risk-off sentiment. The breakout is targeting the 213.00 and 213.50 levels, with support found at 212.00, 211.00, and the 20-day SMA around 210.68. Currently, GBP/JPY is trading at 212.88, up by 0.61%. The Japanese Yen shows varying strength against major currencies, proving to be the strongest against the Australian Dollar.

Technical Outlook For GBP/JPY

The technical outlook for GBP/JPY is positive, as it has moved beyond the 210.00-212.00 range. If it breaks above 213.00, the next targets will be 213.50 and 214.00. Support levels are at 212.00 and the 20-day SMA at 210.68. The Bank of Japan’s policies and bond yield differences impact the Yen’s value. Typically, the Yen is a safe-haven currency that appreciates during market stress. The BoJ’s current ultra-loose and slowly tightening monetary policies have affected its strength against other currencies. The GBP/JPY pair has clearly broken out of its recent range, moving closer to the 213.00 mark. This bullish trend should continue, with potential targets at 213.50 and then 214.00, driven by the weakening Japanese Yen. This risk-off sentiment is unusually affecting the Yen since it typically serves as a safe haven. Recent data indicated that UK wage growth remains steady at 4.5% year-over-year, suggesting the Bank of England will be slow to cut rates, which supports the Pound. In contrast, Japan’s low inflation restricts the Bank of Japan’s ability to tighten its policies aggressively.

Interest Rate Differential And Strategy

The interest rate differential is crucial to our strategy, making it enticing to hold the higher-yielding Pound against the Yen. The UK 10-year gilt yield is about 4.3%, much higher than the Japanese 10-year bond yield around 1.2%. This positive carry makes long GBP/JPY positions attractive for earning daily interest. Given the clear upward movement, we should consider buying call options to take advantage of this momentum with defined risk. Options with a 213.50 strike price set to expire in several weeks could provide a good opportunity for further gains. We expect the rally to continue as the technical picture aligns with underlying fundamentals. We should use the 212.00 level as critical support for any long positions. If it falls below this level, it would indicate that the breakout has failed, leading us to reassess our bullish outlook. Additional support is provided by the 20-day moving average near 210.70, which should also help maintain the uptrend. Looking at 2025, the Bank of Japan took very slow steps away from its ultra-loose monetary policy, disappointing expectations of a stronger Yen. This history suggests that the BoJ will continue to be cautious, limiting the Yen’s chances for any significant rally. Thus, we anticipate continued Yen weakness in the coming weeks. Create your live VT Markets account and start trading now.

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