Technical Analysis and Historical Context

The GBP/JPY pair rose by 0.19% on Thursday, ending the day at 203.30. This reflects a weekly increase of 0.55%. When Friday’s Asian session began, it was trading at 203.36, showing minimal change. Technically, the pair hit a nine-day low of 200.68 on October 17 but has since bounced back. The Relative Strength Index (RSI) indicates a bullish trend, pointing to possible resistance levels at 203.50 and 204.00. If it breaks above 204.00, it could reach a yearly high of 205.32. Support levels are identified at 203.00, 202.00, and the 20-day simple moving average (SMA) at 201.87. This week, the British Pound performed best against the Japanese Yen. A heat map shows percentage changes among major currencies, highlighting a 0.43% increase for GBP against JPY. The analysis is authored by Christian Borjon Valencia, a retail trader since 2010 who focuses on technical analysis. With GBP/JPY trading around 203.36, the bullish momentum indicated by the RSI serves as an important signal. This may be an ideal entry point for strategies that aim to benefit from upward movement. The recent recovery from the 200.68 low on October 17 suggests that buying interest is returning. In the weeks ahead, we might look at buying call options with a strike price near the 204.00 resistance level. A strong break above this level could lead us to re-test the yearly high of 205.32, reached earlier on October 8. This makes short-term bullish strategies particularly appealing right now.

Policy Influence and Interest Rate Dynamics

The strengthening of the Pound is supported by the Bank of England’s current policy. With UK inflation slightly above the target at 3.1% for September, the central bank is likely to keep interest rates high to control price pressures. This hawkish stance provides fundamental backing for the Sterling. On the other hand, the Japanese Yen remains weak, primarily due to the Bank of Japan’s ongoing dovish policy. Latest economic data shows that Japan’s core inflation struggles to stay above the 2% target, offering the BoJ no reason to tighten its monetary policy. The growing interest rate gap between the UK and Japan is the main driver pushing this currency pair higher. This situation mirrors the significant policy differences we experienced in 2022 and 2023, which created strong trends. We are closely monitoring the 203.00 level as our first line of support. A drop below this level would indicate that bullish momentum is weakening, prompting us to consider hedging with put options. Create your live VT Markets account and start trading now.

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