GBP/JPY Price Forecast: Momentum cools as cross holds above key support

GBP/JPY stays technically constructive above its major daily moving averages.
Momentum indicators suggest limited buying pressure, keeping the cross in consolidation mode.
Tokyo CPI data on Friday could provide the next directional catalyst.

Vishal Chaturvedi FXStreet

GBP/JPY trades broadly flat on Thursday after Wednesday’s modest pullback ended a four-day winning streak. At the time of writing, the cross trades around 216.45, with momentum indicators suggesting limited buying interest.

The Japanese Yen (JPY) stays broadly weak as concerns over Japan’s fiscal outlook and its relatively low interest rates compared with other major economies continue to weigh on the currency. This keeps the broader bias for GBP/JPY tilted to the upside.

That said, sentiment around the British Pound (GBP) also remains somewhat fragile, with UK fiscal concerns elevated ahead of the October 28 Budget. At the same time, the Bank of England’s (BoE) cautious stance and reluctance to raise interest rates further are limiting additional support for the Pound.

In the near term, GBP/JPY is likely to remain in consolidation mode, with Tokyo Consumer Price Index (CPI) data due on Friday potentially providing the next directional catalyst.

Technical Analysis

On the daily chart, GBP/JPY maintains a mildly bullish bias, although the technical setup points to consolidation rather than a strong directional move. The cross holds above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), while also staying above the 61.8% Fibonacci retracement at 215.72, keeping the broader structure constructive.

Momentum indicators, however, remain subdued. The Relative Strength Index (RSI) hovers around 54, while the Moving Average Convergence Divergence (MACD) stays slightly above zero but shows fading positive momentum. At the same time, the Average Directional Index (ADX) near 17 points to a weak trend, supporting the case for near-term consolidation.

On the upside, initial resistance is seen at the 78.6% Fibonacci retracement at 217.40, followed by the recent swing high and 100% retracement at 219.50. On the downside, the 215.84-215.72 area, where the 50-day SMA meets the 61.8% retracement, offers immediate support. A break lower could expose the 100-day SMA at 215, followed by the 50% retracement at 214.54 and the 200-day SMA near 212.82.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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

Vishal Chaturvedi

FXStreet

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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