The GBP/JPY exchange rate is steady but sees little activity due to a public holiday in Japan. Traders are being cautious ahead of the Bank of England’s interest rate decision on Thursday. The current rate is about 202.41, just below the day’s high of 202.79.

Technical Analysis

Technical indicators show that the exchange rate is recovering after testing support near the 200.00 level, which matches the 50-day simple moving average (SMA). This level acts as a strong support, helping the uptrend continue. However, the 21-day SMA at 202.81 provides resistance that might limit any immediate upward movement. If this resistance is overcome, the rate could rise toward 204.00 and 205.00, which would be the highest since July 2024. If the rate falls below the 200.00 support, it could create bearish pressure, targeting the October 3 high of around 198.87. Closing below this point may lead to more negative momentum, with the next support level at about 197.50. The Relative Strength Index (RSI) is currently at 53, which indicates a neutral position in the overall bullish trend. The Bank of England’s monetary policies impact the Pound significantly. Changes in interest rates to manage inflation can influence the currency’s value. In extreme situations, Quantitative Easing or Tightening might also affect the Pound based on economic conditions. With GBP/JPY at around 202.41, we remain in a waiting phase before Thursday’s Bank of England interest rate decision. The pair is currently capped by resistance near 202.81, while the 200.00 level offers strong support. This creates a clear range for traders to monitor for any breakout. The upcoming Bank of England meeting is crucial, particularly as UK inflation data from October showed a stubborn rise to 2.9%, well above the 2% target. This puts pressure on the central bank to stick to its hawkish approach, which supports the Pound. Any indication that rates will remain high could easily push the pair above its immediate resistance.

Impact of Policy Divergence

Meanwhile, the Bank of Japan is contributing to yen weakness, supporting the overall uptrend of the pair. At their meeting last week, officials kept their loose policy due to core inflation being below their target, reported at 1.8%. This difference in policies is a key reason why the exchanges around the 200.00 level have consistently attracted buyers. For traders expecting a hawkish surprise from the Bank of England, buying call options with a strike price just above 203.00 might be a cost-effective way to capitalize on a potential breakout. This strategy could benefit from a significant move toward the year-to-date highs near 205.00. Similar setups earlier in 2025 have led to sharp rallies when UK economic data exceeded expectations. On the flip side, if the Bank of England hints at a more dovish stance due to slowing growth, the 200.00 support level will become very important. A drop below this support zone could result in a quick decline. Traders might consider buying put options with a strike price below 200.00, targeting a move toward the 198.87 range. Given the uncertain nature of the upcoming announcement, implied volatility on GBP/JPY options has increased. Traders could explore strategies like straddles or strangles to profit from a significant price swing in either direction without needing to predict the meeting’s outcome. We are observing implied volatility in one-week options for the pair reaching levels not seen since the unexpected rate hold back in August 2025. Create your live VT Markets account and start trading now.

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