GBP/JPY has pulled back from the resistance level of 211.50 due to a general weakness in the Pound. Comments from BoJ Governor Ueda provided some support for the Yen, putting pressure on the currency pair. If the price breaks below 210.00, it would signal a triple top at 211.50. The pair is trading lower after failing to break through the 211.50 resistance, which held on December 22 and 26. Technical indicators show weakening bullish momentum, but there hasn’t been a clear shift in trend yet.

BOJ Policy Stance

BoJ Governor Ueda confirmed the bank’s intention to tighten monetary policy if economic forecasts remain unchanged. This, along with the overall weakness of the GBP, affects the pair. On the 4-hour chart, GBP/JPY is at 210.88, showing moderate losses. The Relative Strength Index (RSI) is below the 50 mark, and the Moving Average Convergence Divergence (MACD) has turned negative. Support at the trendline is at 210.50, and a drop below 210.05 would confirm a triple top and a trend change. Potential downside targets include 208.90 and 208.00. On the upside, if the pair exceeds the 211.59 high, targets could reach the 127.2% Fibonacci extension at 212.75 and the 161.8% extension at 214.38. The British Pound is showing mixed results against other major currencies, performing best against the Canadian Dollar. Looking back at late December 2025, GBP/JPY repeatedly failed to surpass the 211.50 resistance, indicating strong selling pressure. This rejection, along with Ueda’s comments about tightening policy, created a bearish outlook. At that time, technical indicators pointed to weakening bullish momentum. Recent data supports this perspective. The latest Tokyo Core CPI for December 2025, released last week, was 2.4%, slightly above expectations and marking the 20th consecutive month above the BoJ’s target. This strengthens the Yen and supports continued gradual policy normalization by the Bank of Japan, contributing to the current weakness in the pair. On the other hand, the Pound continues to weaken as the new year begins. Final December 2025 inflation numbers showed the core CPI steady at 3.8%, but the latest S&P Global/CIPS UK Manufacturing PMI fell to 47.1, indicating ongoing contraction. The mix of persistent inflation and a slowing economy is putting pressure on the Sterling.

Trading Strategies

Given the current situation, we recommend that derivative traders consider preparing for further declines in the coming weeks. If the price breaks below 210.00, as mentioned in last month’s analysis, it would confirm the triple top pattern, opening the door to targets near 208.90. Buying February put options with a strike price around 209.00 provides a defined-risk approach to capitalize on this potential decline. Implied volatility in GBP/JPY has been rising from low levels seen in late 2025, indicating that the market expects larger price movements. This makes strategies like vertical put spreads appealing, as they can balance the higher cost of options while still allowing for downside exposure. This is particularly relevant with the UK wage data release coming next week, which could serve as a significant market catalyst. However, we must watch for the risk of a sudden reversal. A sustained break above the 211.59 high from December 22, 2025, would invalidate the bearish outlook. In that case, traders might want to use call options to target the Fibonacci extension level at 212.75. Create your live VT Markets account and start trading now.

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