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GBP/JPY Price Forecast: Bulls target 211.10 despite ongoing bearish trend
- From a low of 209.13, GBP/JPY rebounds as buyers hold the former resistance trendline.
- Short-term buying momentum gathers strength as RSI nears bullish territory.
- Above 211.10, a breakout would bring 212.00 and the 200-day SMA at 212.95 into view.
A gain of over 0.20% on Monday takes GBP/JPY above 210.00 after the cross tested a six-day low of 209.13. Sentiment remains positive amid the prospect of de-escalation in the Middle East conflict, while US equities trade higher as AI company Anthropic files for an IPO.
GBP/JPY Price Forecast: Downward Bias Persists Despite Recovery
Despite breaking above a descending resistance trendline in mid-October, GBP/JPY retains a downward bias. That breakout carried the cross to a one-month high of 211.99, before it pulled back towards its current levels near the psychological 210.00 threshold.
Only a recovery above the 25 August high of 217.48 would overturn the existing pattern of lower highs and lower lows in GBP/JPY.
Further gains are suggested by momentum: the Relative Strength Index (RSI) is climbing and nearing a bullish reading.
A break above 211.00 could take GBP/JPY towards the 50-day Simple Moving Average (SMA) at 211.10. Beyond that, 212.00 would be the next level in focus, with the 200-day SMA at 212.95 following.
Conversely, a fall through the 23 October low of 209.13 would leave GBP/JPY vulnerable to a test of 209.00. Below that, the former resistance trendline, now support at 209.00, would be the next support level, before losses could extend towards the 30 September low of 206.89.
GBP/JPY Daily Price Chart
Pound Sterling: Key Questions Answered
Dating back to 886 AD, the Pound Sterling (GBP) is the world’s oldest currency and the official currency of the United Kingdom. According to 2022 data, it ranks fourth among the most traded currencies in foreign exchange (FX), representing 12% of all transactions, with average daily turnover of $630 billion. Among its main trading pairs, GBP/USD, known as ‘Cable’, represents 11% of FX trading. GBP/JPY, which traders call the ‘Dragon’, accounts for 3%, while EUR/GBP accounts for 2%. Responsibility for issuing the Pound Sterling rests with the Bank of England (BoE).
Monetary policy set by the Bank of England is the most important single influence on the Pound Sterling’s value. Decisions depend on whether the BoE has met its core objective of “price stability” – inflation holding steady at around 2%. Adjusting interest rates is its main means of meeting that objective. Faced with excessively high inflation, the BoE will seek to curb it by increasing interest rates, raising borrowing costs for households and businesses. GBP generally benefits because higher rates make the UK a more appealing destination for international investors’ funds. By contrast, inflation falling too low signals a slowdown in economic growth. The BoE will then consider cutting interest rates to reduce the cost of credit, encouraging businesses to borrow more and invest in projects that generate growth.
By revealing the economy’s health, data releases can affect the Pound Sterling’s value. GDP, Manufacturing and Services PMIs, and employment figures are among the indicators capable of moving GBP. Sterling benefits from economic strength, which draws in more overseas investment and may also prompt the BoE to raise interest rates, directly strengthening GBP. Weak economic figures, on the other hand, are likely to weigh on the Pound Sterling.
The Trade Balance is another important release for the Pound Sterling, measuring the gap between a country’s export earnings and its spending on imports over a specified period. Strong overseas demand for a country’s exports supports its currency through the additional demand generated by foreign buyers purchasing those goods. A positive net Trade Balance therefore strengthens the currency, while a negative balance has the opposite effect.
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