GBP/JPY is rising as lower Japanese Government Bond (JGB) yields put pressure on the Yen. The pair shows a positive outlook because it is above key moving averages and strong momentum indicators. Currently, GBP/JPY is trading around 206.12, with buyers supporting the 205.00 level after a rebound following three days of losses. Since April, the pair has increased by 11.7% from a low of 184.38, showing a pattern of higher highs and lows.

Resistance and Support Levels

Immediate resistance is in the range of 206.00 to 207.20. If momentum grows, it could reach a high of 208.00. Support is found between 204.00 and 205.00, alongside the 21-day Simple Moving Average (SMA). The Relative Strength Index (RSI) is at 59, indicating bullish conditions. The MACD line is above the signal line, suggesting positive momentum, albeit decreasing. If GBP/JPY falls below 204.00, the trend may turn bearish, with support at the 200.00 level, aligned with the 100-day SMA. The British Pound is strong against major currencies, especially the Yen. The GBP is performing well against the Yen while showing slight variations against other leading currencies. Given the strength of GBP/JPY and the defense of the 205.00 support level, there are good opportunities for bullish strategies. Traders might consider buying call options with strike prices near 207.00 or 208.00, aiming for a possible breakout to new highs. These options, expiring in late December 2025 or January 2026, would allow traders to benefit from potential price increases in the coming weeks.

Diverging Central Bank Policies

This positive outlook is supported by different central bank policies. Recent data shows UK inflation stubbornly holding at 3.1% for November 2025, pushing back expectations for a Bank of England rate cut. Meanwhile, the Bank of Japan is likely to maintain its supportive stance, as the 10-year government bond yield dropped to 0.85% this week, which continues to weigh on the Yen. For those wanting to manage risk, a bull call spread could be a smart approach. This strategy involves buying a call option at a lower strike, like 206.50, while selling a call option at a higher strike, such as 208.50. This method reduces initial costs and potential losses while still allowing for profit if the pair rises as predicted. However, we should also prepare for a possible reversal, even if it seems unlikely at the moment. If GBP/JPY decisively drops below the 204.00 support level, it would indicate a change in short-term momentum. In this case, purchasing put options with a strike price around 202.00 could act as a hedge against long positions or a way to profit if the price moves toward 200.00. This scenario reminds us of the strong rally seen during the 2023-2024 period. At that time, the significant interest rate difference between the UK and Japan was a key factor driving prices higher. A similar trend seems to be developing as we approach the new year. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now