GBP/JPY Price Forecast: Surpasses 200.00 as soft Japan PMIs weigh on Yen
- GBP/JPY clears 20-day SMA at 199.67, setting up bullish continuation above the 200.00 mark.
- RSI turns positive, suggesting buyers may push toward 200.50, 201.00, and yearly high at 201.27.
- Downside risks emerge on a drop below 200.00, with key support at 199.67 and 50-day SMA near 198.97.
The GBP/JPY advances over 0.22% on Wednesday after the Japanese Yen weakened on softer Flash PMIs reported. At the time of writing, the cross-pair trades at 200.16 after hitting a daily low of 199.46.
GBP/JPY Price Forecast: Technical outlook
Technically, the GBP/JPY is poised to test higher prices. After clearing the 20-day Simple Moving Average (SMA) at 199.67, the cross is set to end the day above 200.00, which paves the way for further upside.
The Relative Strength Index (RSI) is bullish, an indication that buyers are gathering steam.
Therefore, if GBP/JPY rises above 200.50, the next area of interest would be 201.00, ahead of the yearly high of 201.27. On further strength, the next ceiling level would be 202.00. Conversely, if the cross-pair retreats below 200.00, the first support would be the 20-day SMA at 199.67. A breach of the latter will expose the 50-day SMA at 198.97, ahead of the 100-day SMA at 197.49.
GBP/JPY Price Chart – Daily
Pound Sterling FAQs
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).
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.
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.
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.
