Pound Sterling fell 0.36% on Thursday as risk aversion increased demand for the Japanese Yen. GBP/JPY traded at 209.09 after hitting a daily high of 209.55. Fresh worries about disruption from AI pushed Wall Street lower. However, Gold, Silver, and the US Dollar did not benefit much from the shift into safer assets.

Technical Outlook Shifts

The broader trend is still up, but the drop below the 50-day simple moving average (SMA) at 210.87 has shifted the outlook to neutral-to-bullish. First support sits near a trendline in the 207.00 to 207.20 area. The Relative Strength Index (RSI) shows bearish momentum, which suggests more short-term downside. If the pair falls below 207.00, the next supports are the 100-day SMA at 206.85 and the 16 December swing low at 206.77. If selling pressure continues, the next support is the 1 December low at 205.20. On the upside, a move above 208.50 brings resistance at 209.00, then 209.55, and then 210.00. In the analysis from this time in 2025, GBP/JPY was trading near 209.00 as AI disruption fears boosted the yen. That bearish momentum signal proved right over time. The pair is now struggling below 199.00. What started as an early technical breakdown has since turned into a clear downtrend.

Updated Macro Backdrop

Right now, the fundamental picture for the pound looks weak, giving little reason to expect a strong rally. UK inflation has cooled to 2.5%, down sharply from prior years. As a result, the Bank of England is openly discussing rate cuts in the second half of 2026. This outlook limits how much the pound can strengthen. On the other side, the yen has regained support that was missing in early 2025. The Bank of Japan finally ended negative interest rates late last year. While its benchmark rate is still just 0.10%, the contrast versus a more dovish Bank of England is clear. This policy gap continues to support the yen against the pound. With this backdrop, it may make sense to prepare for further downside or sideways trading in the coming weeks. Buying put options with strikes below the 198.00 support level would benefit from another drop. If you expect the pair to stay capped below resistance, selling call options with a strike near the psychological 200.00 level can be a way to collect premium. Create your live VT Markets account and start trading now.

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