The GBP/JPY has dropped for the second day in a row after reaching a high of 212.16, driven down by weaker global stock markets. The RSI is approaching 60, indicating a decrease in bullish momentum and potential risks for a pullback. If it falls below 210.00, targets could include 208.95 and the 50-day SMA, while 211.00 might limit short-term gains. On Wednesday, the pair fell below 211.00, marking a 0.27% decline. As of Thursday morning in Asia, it holds steady at 210.85. With a light economic calendar for both Japan and the UK, traders are focusing on geopolitical events and overall market sentiment. The falling global equity markets have pushed GBP/JPY lower, which is down 0.12% for the year so far.

Technical Outlook For GBP/JPY

The technical outlook for GBP/JPY remains positive, even though the RSI indicates a shift in momentum. If it drops below 210.06, it may fall further under 210.00, targeting 208.95 and possibly reaching 206.74. On the upside, if it goes above 211.00, it might move closer to 212.00. This week, the Japanese Yen (JPY) performed best against the Canadian Dollar, with notable percentage changes among major currencies. For example, JPY/USD experienced a change of 0.84%, showcasing current currency trends. The GBP/JPY has retreated from its high of 212.16, and momentum seems to be shifting. The RSI has dropped from overbought levels, suggesting the upward trend is slowing down for now. For derivative traders, it’s crucial to monitor the 210.00 level, as breaking below it may lead to more selling. Despite the bearish technical signals, it’s important to note the supportive fundamentals for the Pound. Recent UK inflation data for December 2025 showed a rate of 4.0%, which was higher than expected. This could delay interest rate cuts from the Bank of England, creating a divergence from other central banks that may help prop up the Pound in the short term.

Speculation On Bank Of Japan Policy

On the flip side, speculation about the Bank of Japan’s policy is intensifying. Many traders expected a shift away from negative interest rates by April 2026, but recent cautious remarks from officials have raised doubts about the timeline, leading to more volatility. If unexpected hawkish news comes from the BoJ, it would likely strengthen the Yen and push the pair down toward the 50-day moving average around 206.74. We are also witnessing a decline in global stock markets at the start of 2026, with the S&P 500 down nearly 1.5% in the first week. This trend usually impacts the risk-sensitive GBP/JPY pair negatively. Given these mixed signals, traders might consider buying put options with a strike price below 210.00 to hedge against a sharper correction. This approach enables profit from a downward move while limiting initial risk to the premium paid. It’s important to keep in mind how quickly this pair can move, especially in early January when there may be less liquidity. We saw a similar period of uncertainty in early 2024 before the pair eventually rose due to news about policy divergence. However, given the risk of a significant decline, it’s wise to protect against downside risks until a clear direction is established. Create your live VT Markets account and start trading now.

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