CFD Trading Rate Great Britain Pound vs Japanese Yen (GBPJPY)

• GBP/JPY remains under heavy selling pressure for the second successive day on Thursday.
• The divergent BoE-BoJ policy expectations, along with geopolitical risks, weigh on the cross.
• The technical setup favours bears and supports prospects for a further depreciating move.

The GBP/JPY cross drifts lower for the second straight day on Thursday – also marking the third day of a negative move in the previous four – and drops to a two-and-half-week low during the first half of the European session. Spot prices currently trade around mid-185.00s and seem vulnerable to slide further ahead of the Bank of England's (BoE) monetary policy decision later today.

Heading into the key event risk, expectations that the UK central bank will keep the door open for a potential interest rate cut in May, along with the less dovish-inspired US Dollar (USD) buying, weigh heavily on the British Pound (GBP). The Japanese Yen (JPY), on the other hand, continues to draw support from the Bank of Japan's (BoJ) hawkish tilt last week and geopolitical risks. This further contributes to the heavily offered tone surrounding the GBP/JPY cross.

From a technical perspective, the overnight close below the 23.6% Fibonacci retracement level of the rally in January was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have just started drifting in negative territory and suggest that the path of least resistance for the GBP/JPY cross is to the downside. Hence, a subsequent slide towards testing the 38.2% Fibo. level, around the 185.00 psychological mark, looks like a distinct possibility.

A convincing break below the latter will set the stage for an extension of the recent pullback from the vicinity of the 189.00 mark, or the highest level since August 2015 touched last month. The GBP/JPY cross might then accelerate the slide towards the 184.50 intermediate support before eventually dropping to sub-184.00 levels, representing the 100-day Simple Moving Average (SMA) and the 50% Fibo. level confluence region.

On the flip side, the 186.00 round figure now seems to act as an immediate hurdle ahead of the 23.6% Fibo. level breakpoint, around the 186.45-186.50 region. A sustained strength beyond the latter will suggest that the recent corrective decline has run its course and shift the near-term bias back in favour of bullish traders. The subsequent move up has the potential to lift the GBP/JPy cross beyond the 187.00 mark, towards the 187.40 hurdle.

GBP/JPY daily chart

Technical levels to watch

• GBP/JPY falls over 0.60%, impacted by cautious sentiment before Fed policy decision.
• Drop below Tenkan-Sen (187.45) suggests more decline; watch supports at 186.00, 185.64.
• Recovery hinges on surpassing 187.00; resistance at 187.45, 188.00, and January 23 high of 188.91.

The GBP/JPY plunged sharply during the North American session, down by more than 0.60% as market participants shifted risk-averse ahead of the US Federal Reserve’s (Fed) monetary policy decision. That, alongside the Bank of England (BoE) meeting on Thursday, keeps the Pound Sterling (GBP) downward pressured while the Japanese Yen (JPY) advances. At the time of writing, the cross exchanges hands at 186.15 after hitting a high of 187.59.

The pair is neutral biased but tilted to the downside after diving below the Tenkan-Sen at 187.45, That exacerbated the GBP/JPY fall below 187.00, which opened the door for further downside. The next support surfaces at 186.00, followed by the Senkou Span A at 185.64. Further downside is seen at 185.00.

On the other hand, if buyers step in, they must reclaim 187.00. Once that level is cleared, up next would be the Tenkan-Sen at 187.45, ahead of challenging 188.00, before testing fresh highs at 188.91, the January 23 high.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels

• GBP/JPY rebounds from low, buoyed by changing market sentiments and central bank rate speculations.
• Break above Tenkan-Sen (187.72) may signal uptrend, eyeing recent high at 188.91, with 188.00 as pivotal.
• Downside risks if below 186.51; potential supports at 185.77, key 185.00 level, and 184.47 low.

The British Pound (GBP) pares earlier losses against the Japanese Yen (JPY) on Tuesday, even though data eased the pressure off the Bank of England (BoE) to keep interest rates higher. Therefore, the GBP/JPY cross-pair trades at 187.34 after hitting a daily low of 186.51.

From the daily chart perspective, the GBP/JPY is trading sideways just below the Tenkan-Sen level at 187.72 dot. If buyers lift the exchange rate above the Tenkan Sen, that will open the door to challenging the January 23 high at 188.91, but firstly they would need to reclaim 188.00. On the flip side, if sellers step in and drag prices below the January 30 low of 186.51, that will open the door to challenge the Senkou Span A level at 185.77, followed by the psychological 185.00 figure, ahead of the January 12 daily low of 184.47.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels

• GBP/JPY continues to lose ground as risk aversion heightens due to the Middle East tension.
• Japan’s Unemployment Rate contracted to 2.4% in December from 2.5% prior.
• Biden administration is expected to go for military actions in retaliation to the recent drone attack.
• BoE is expected to maintain its current interest rate of 5.25% in its February meeting.

GBP/JPY extends its losses for the second session on Tuesday, edging lower to near 187.40 during the Asian session. The GBP/JPY cross faces a challenge of risk-off sentiment due to the escalated situation in the Middle East, which drives the investors toward the safe-haven Japanese Yen (JPY), which in turn, acts as a headwind for the GBP/JPY pair.

The expectation is that the administration of US President Joe Biden will give the go-ahead for military actions in retaliation to the recent drone attack on a US outpost in Jordan. This attack led to the loss of three US troops and left at least 24 individuals injured.

December’s Unemployment Rate, which comes from the Ministry of Health, Labor and Welfare, showed a reduction in the percentage of unemployed people in Japan. The report showed a contracted figure of 2.4% against the market consensus of remaining consistent at 2.5%. Furthermore, the investors will eye on Retail Trade data scheduled to be released on Wednesday. The annual rate is predicted to print a reading of 4.7% in December, contracting from 5.3% prior.

The Bank of England (BoE) is expected to keep interest rates unchanged at 5.25% during its February monetary policy meeting. Members of the BoE have stressed the importance of maintaining a prolonged period of restrictive monetary policy to address inflation concerns.

BoE Governor Andrew Bailey has expressed the view that it is premature to consider lowering interest rates. Nevertheless, if there are indications that the inflation situation is improving, the central bank might reconsider its stance on rate cuts. Market participants have adjusted their expectations for rate cuts, with the first fully priced in for June instead of May as initially anticipated before the decision.

• GBP/JPY languishes above the weekly trough amid mixed fundamental cues.
• The JPY benefits from geopolitical risks, though weaker Tokyo CPI cap gains.
• Bets that the BoE will hold rates near a 16-year high help limit the downside.

The GBP/JPY cross remains on the defensive for the fourth successive day on Friday, albeit lacks follow-through selling and remains confined in the previous day's broader trading range through the first half of the European session. Spot prices currently trade just above mid-187.00s and remain well within the striking distance of the weekly low touched on Wednesday.

Investors remain worried that the Israeli-Hamas war could trigger a broader conflict in the Middle East as multiple nations and armed groups continue targeting each other’s territories. This, along with the uncertain global economic outlook, offset the latest optimism led by the announcement of additional monetary stimulus by the People's Bank of China (PBoC) and temper investors' appetite for riskier assets. This is evident from a generally weaker tone around the equity markets, which is seen benefitting the Japanese Yen's (JPY) relative safe-haven status and acting as a headwind for the GBP/JPY cross.

Apart from this, the Bank of Japan's (BoJ) hawkish tilt on Tuesday, suggesting that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place, lend additional support to the JPY. That said, weaker Japanese data, showing that the core Consumer Price Index (CPI) in Tokyo fell below the BoJ's 2% target for the first time in nearly two years, caps gains for the JPY. Furthermore, a strong start to the year by the UK economy gives the Bank of England (BoE) a reason to hold interest rates next week and contributes to limiting the downside for the GBP/JPY cross.

Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the recent pullback from the vicinity of the 189.00 round figure, or a near two-month peak retested earlier this week. Nevertheless, the GBP/JPY cross remains on track to end in the red for the first time in the previous four weeks as the market focus now shifts to the crucial BoE monetary policy meeting on February 1.

Technical levels to watch

• The GBP/JPY trimmed into median bids with Japanese inflation preview on Friday.
• UK sees GfK Consumer Confidence to end the trading week.
• Guppy entrenched in rangebound pattern.

The GBP/JPY strung along the midrange on Thursday, trading on the low side of the 188.00 handle as markets gear up for Japan’s Tokyo Consumer Price Index (CPI) inflation print early Friday.

It was a light week on the economic calendar for the Pound Sterling (GBP), but Wednesday’s UK Purchasing Managers’ Index (PMI) figures broadly came in above expectations, helping to keep the GBP bid heading into the back half of the trading week.

Japan’s Tokyo CPI inflation print on Friday is expected to moderate for January, with the Core Tokyo CPI forecast to tick down to 1.9% from 2.1% for the year through January as Japanese inflation continues to slow from last January’s YoY peak of 4.3%.

Headline YoY Tokyo CPI in January last printed at 2.4%, with Core-Core Tokyo CPI (headline inflation less fresh food and energy prices) likewise expected to come down from the previous period’s 3.5%.

On the UK side, GfK Consumer Confidence in January is expected to tick up slightly to -21 from December’s -22.

Next week sees mostly mid-tier data for both the UK and Japan, but traders will be gearing up for the Bank of England’s (BoE) next showing slated for next Thursday.

GBP/JPY Technical Outlook

GBP/JPY continues to be plagued by a sideways grind on the intraday charts as bids push into the midrange as the 200-hour Simple Moving Average (SMA) drifts into 187.50, putting a technical floor underneath near-term consolidation.

The pair is up over 5% from the last significant pullback into 178.74 at the 200-day SMA in early 2024, but bullish momentum has fully drained out of the pair as middling candles pile up at familiar highs.

GBP/JPY Hourly Chart

GBP/JPY Daily Chart

• GBP/JPY falls 0.26% after BoJ retains accommodative policy, hinting at future changes.
• Struggling to hold above 188.00; support at 187.00 and Tenkan-Sen 186.70.
• Rebound over 188.00 may lead to 188.92 year-to-date high, targeting 189.00, eyeing key 190.00 level.

The GBP/JPY dropped by 0.26% late in the North American session after the Bank of Japan’s (BoJ) decision to maintain monetary policy loose. However, words from BoJ Governor Kazue Ueda had opened the door to normalize policy if inflation keeps heading up. At the time of writing, the cross exchanged hands at 187.64 after hitting a high of 188.47.

The daily chart portrays the pair peaked at around the 188.00 figure, and since sellers took over buyers, they dragged the GBP/JPY exchange rate to the 187.00 handle. Nevertheless, they must clear the psychological 187.00 barrier ahead of hurdling the Tenkan-Sen at 186.70. A breach of those two levels will expose the Senkou Span A at 185.26, followed by the 185.00 mark.

On the other hand, if GBP/JPY regains 188.00, that could pave the way to test the current year-to-date (YTD) high of 188.92, ahead of 189.00 and 190.00.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels

• GBP/JPY struggles for a direction ahead of the BoJ meeting.
• No surprise is anticipated in BoJ’s meeting amid insignificant wage growth.
• The BoE could consider rate cuts if fears of a technical recession remain persistent.

The GBP/JPY pair trades inside Friday’s trading range as investors shift focus towards the monetary policy meeting by the Bank of Japan (BoJ), which will be announced on Tuesday. The BoJ is less-likely to provide roadmap about exiting the decade-long ultra-loose monetary policy.

Slower wage growth and earthquake on New Year’s Day in Japan have dampened the overall economic outlook of the economy, offering a strong argument to BoJ policymakers to extending the expansionary monetary policy stance. Therefore, no tweak in the Yield Curve Control (YCC) and no change in easy monetary policy is anticipated by market participants.

While the underlying inflation in the Japanese economy has been above 2% consistently, BoJ policymakers are less convinced for persistent inflation above the 2% target amid insignificant contribution from the labor cost index. The maintenance of a status-quo by the BoJ could build more pressure on the Japanese Yen.

On the Pound Sterling front, fears of a technical recession in the United Kingdom economy have escalated as households’ spending has been suffered significantly due to higher interest rates by the Bank of England (BoE) and persistent inflationary pressures.

The BoE could be prompted to exit from the historically aggressive interest rate stance to tame risks of economy shifting into a recession. Meanwhile, investors await for preliminary S&P Global UK PMI for January, which will be published on Wednesday.

• GBP/JPY fluctuates, impacted by Japanese CPI and weak UK retail sales; currently at 188.11.
• Bullish bias persists, but a close below 188.22 may trigger retracement towards 187.00 and potential support levels.
• Break above 188.00 sets the stage for further gains, targeting YTD high at 188.92 and potentially reaching 190.00.

GBP/JPY seesaws late in the North American session but is down 0.05% so far after trading within a 150 pips range courtesy of CPI data from Japan and weaker retail sales from the UK. Therefore, the pair traveled within its daily and eight-year high and low of 188.92/187.40 before settling at current exchange rates. At the time of writing, the cross trades at 188.11.

From a technical standpoint, the pair remains bullishly biased, but a daily close below January’s 18 one at 188.22 could initially open the door for a retracement toward the 187.00 figure. Further downside sentiment could drag the GBP/JPY exchange rate towards the Tenkan-Sen at 185.84 before challenging the Senkou Span A at 184.74.

On the contrary, a daily close above 188.00 could pave the way for further upside, with the year-to-date (YTD) high in place at 188.92, ahead of 189.00. Further upside is seen once those levels are cleared on its way to 190.00.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels

• GBP/JPY falls sharply from 189.00 as the Pound Sterling hit by weaker Retail Sales data.
• Vulnerable UK consumer spending data has deepened recession fears.
• Market participants shift focus towards the BoJ policy meeting.

The GBP/JPY pair drops from fresh eight-year high of 189.00 in the early New York session. The cross faces pressure as the United Kingdom Retail Sales contracted sharply in December despite festive season.

The Office for National Statistics (ONS) has reported that significant fall in sales at food stores and early Christmas shopping resulted in a sharper decline in the overall consumer spending. Meanwhile, higher consumer spending was also dented by deep cost-of-living crises due to higher interest rates and stubborn price pressures.

Annual Retail Sales suffered a steep contraction of 2.4% while market participants projected a strong growth of 1.1%. A vulnerable consumer spending has renewed fears of a technical recession in the UK economy.

Investors should note that the UK economy contracted by 0.1% in the third quarter of 2023 as per the revised estimates from the UK ONS. Latest projections from the Bank of England (BoE) indicated that the economy is not expected to show any growth in the final quarter of 2023. If the Q4 Gross Domestic Product (GDP) contracts, it would be right to state the UK economy in a technical recession.

Going forward, it would be challenging for Bank of England (BoE) policymakers to retain restrictive monetary policy stance for ensuring a price stability or deliver a dovish decision due to dismal economic outlook.

On the Japanese Yen front, market participants await Bank of Japan’s (BoJ) first monetary policy meeting, which is scheduled for Tuesday. The BoJ is unlikely to emphasize on exiting the decade-long ultra-loose monetary policy due to unfavorable Middle East tensions, easing consumer price inflation and slower wage growth.

• GBP/JPY loses its recent gains around 188.25 following the downbeat UK Retail Sales data.
• UK Retail Sales fell 3.2% MoM in December from a 1.4% rise in November, below the market consensus
• The cross holds above the key EMA with the overbought RSI condition.
• The immediate resistance level will emerge at 189.00; 187.32 acts as an initial support level for EUR/JPY.

The GBP/JPY cross trades in positive territory for the fifth consecutive day during the early European session on Friday. However, the cross loses its recent gains and retreats from the intraday high of 188.93 after the release of weaker-than-expected UK Retail Sales data. The cross currently trades near 188.25, up 0.04% on the day.

The latest data from the National Statistics revealed on Friday that UK Retail Sales fell 3.2% MoM in December from a 1.4% rise in November, below the market consensus of a 0.5% drop. Retail Sales ex-fuel dropped 3.3% MoM in December from the previous reading of a 1.5% increase.

On an annual basis, UK Retail Sales came in at -2.4% YoY in December versus 0.2% prior, worse than the market expectation of a 1.1% rise. The Pound Sterling drops lower following the downbeat UK data.

From a technical perspective, GBP/JPY maintains the positive view unchanged on the four-hour chart as the cross holds above the 50- and 100-hour Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) holds in bullish territory above the 50 midline. However, the overbought RSI condition indicates that further consolidation cannot be ruled out before positioning for any near-term GBP/JPY appreciation.

The psychological round mark at 189.00 acts as an immediate resistance level for the cross. Any follow-through buying above the latter will pave the way to the upper boundary of the Bollinger Band at 189.36. Further north, the next hurdle is seen near a weekly high of December 2014 at 189.72, followed by the 190.00 round figure.

On the flip side, a low of December 18 at 187.32 acts as an initial support level for EUR/JPY. The additional downside filter to watch is the 187.00 psychological mark, followed by the 50-hour EMA at 185.93. A breach of this level will see a drop to the lower limit of the Bollinger Band at 184.85. The key contention level will emerge at the 100-hour EMA at 184.65. A breach of the latter would likely resume the downtrend.

GBP/JPY four-hour chart