The Pound has jumped to new highs above 203.30, rising alongside a weakened Japanese Yen. This shift follows Japan’s announcement of a more relaxed fiscal budget, which caused the Yen to slide on Wednesday. Even with disappointing UK employment data, the Pound bounced back from below 202.5 and broke through the 203.30 resistance, reaching session highs over 203.50 for the first time since late October. The Pound is benefiting from Yen weakness, as Japan’s Prime Minister Takaichi outlined a goal to boost government spending.

Technical Analysis

The GBP/JPY outlook is mixed. The 4-hour RSI is high but not overbought, while the MACD shows a possible downward trend. If prices stabilize, bulls may target previous highs around 204.25 and even 205.33. If the price drops below 203.30, support could be found at 202.35, with further declines potentially testing levels between 201.80 and 200.30-200.60. The currency table shows the JPY declining against major currencies, with a -0.28% change against the British Pound. Written by communications sciences graduate Guillermo Alcala, this analysis highlights that with GBP/JPY breaking through 203.30, the immediate trend seems to be upward. The main driver is the weakened Yen, influenced by expectations of a more relaxed fiscal policy and low interest rates from the Bank of Japan. This supports the bullish short-term outlook for the pair.

Market Forces

The Yen’s decline is crucial, and we should monitor it closely. With the Prime Minister ruling out a near-term rate hike, the market now sees less than a 15% chance of a Bank of Japan rate increase by December 2025. This is a sharp drop from the 40% likelihood seen last month, encouraging JPY selling. On the other hand, we shouldn’t overly focus on the weak UK employment data from November 11, 2025. Market attention is likely shifting to the upcoming inflation report, especially since the UK’s last CPI reading in October 2025 was 2.4%, staying above the Bank of England’s target. This keeps the BoE on hold and supports the Pound Sterling. For those looking to capitalize on further gains, buying call options with a strike price near 204.50 may be a worthwhile strategy aimed at the late October highs. The interest rate difference between the Bank of England and the Bank of Japan now exceeds 500 basis points, making it very attractive for carry trades and likely to drive additional buying. However, we must remain cautious, as some technical indicators suggest the upward momentum might be slowing. To mitigate risk against a pullback, traders could consider buying put options with a strike price just below 203.00 to protect long positions. This serves as a hedge if prices slip below the previous resistance and move back towards the 202.35 support level. Create your live VT Markets account and start trading now.

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