GBP/JPY price forecast: Gains 0.35% as yen weakens, tests 206.00

GBP/JPY rises 0.35% as Yen softens, recovering from earlier pullback.
RSI signals bullish momentum, with upside favored while the pair holds above 205.00.
Break above 206.00 opens path toward 206.86 and higher targets at 207.00, 208.00 and 210.00.

Christian Borjon Valencia FXStreet

GBP/JPY trims some of last Friday’s losses, is up 0.35% as the Japanese Yen weakens despite efforts and threats by Japanese authorities, to stabilize the JPY. At the time of writing, the cross-pair trades at 205.64, after reaching a low of 204.94.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY is upward biased, as the pair seems poised to finish above 205.00. Momentum as depicted by the Relative Strength Index (RSI) favors further upside. Given the backdrop, continuation is the path of least resistance.

If GBP/JPY rises past 206.00, buyers could challenge the yearly peak of 206.86, ahead of the 207.00 milestone. Once cleared, the next resistance is 208.00 ahead of 210.00.

Conversely, if GBP/JPY drops below the day’s low of 204.94, the next support would be the November 21 low of 204.30, followed by 204. Once surpassed, the next stop is the 20-day SMA at 203.30.

GBP/JPY Price Chart – Daily

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Christian Borjon Valencia

FXStreet

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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