GBP/JPY Price Forecast: Gains momentum to near 197.50, bullish outlook remains intact

GBP/JPY strengthens to around 197.50 in Wednesday’s early European session, adding 0.16% on the day.
The constructive outlook of the cross remains intact above the key 100-day EMA, with the bullish RSI indicator.
The immediate resistance level emerges in the 198.90-199.00 zone; the first support level to watch is 196.28.

Lallalit Srijandorn FXStreet

The GBP/JPY cross gathers strength to near 197.50 during the early European session on Wednesday. The Japanese Yen (JPY) softens against the Pound Sterling (GBP) as US President Donald Trump raises doubts over a US-Japan deal. Additionally, Trump said that he could impose a tariff of 30% or 35% on imports from Japan, above the tariff rate of 24% announced on April 2.

Technically, the constructive outlook of GBP/JPY remains in place as the cross is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is reinforced by the Relative Strength Index (RSI), which stands above the midline near 58.00, suggesting that further upside looks favorable.

On the bright side, the first upside barrier for the cross emerges at the 198.90-199.00 region, portraying the upper boundary of the Bollinger Band and psychological level. A decisive break above this level could pick up more momentum and aim for the crucial resistance level at the 200.00 round mark. Further north, the additional upside filter to watch is 200.75, the high of May 28, 2024.

In the bearish case, the initial support level for the GBP/JPY is seen at 196.28, the low of July 1. A breach of this level could drag the cross toward 194.18, the lower limit of the Bollinger Band. The next contention level is located at 193.85, the 100-day EMA.

GBP/JPY daily chart

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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