GBP/JPY Price Forecast: Upside bias holds as 21-day SMA cushions declines
- GBP/JPY softens as Sterling retreats following UK political headlines ahead of the November 26 budget.
- Technical setup stays constructive above key moving averages, with the 21-day SMA offering immediate support.
- Momentum indicators flatten, pointing to a potential consolidation before the next directional breakout.
The British Pound (GBP) trades on the back foot against the Japanese Yen (JPY) on Friday after the Pound weakened broadly following a Financial Times report that Prime Minister Keir Starmer and Chancellor Rachel Reeves have abandoned plans to raise income-tax rates ahead of the November 26 budget.
At the time of writing, GBP/JPY is trading around 203.00, down nearly 0.30%, after rebounding from an intraday low of 202.34.
From a technical perspective, the daily chart continues to show an overall uptrend, with prices holding comfortably above both short-term and long-term moving averages.
On the downside, the 21-day Simple Moving Average (SMA) at 202.49 is acting as immediate support. A deeper pullback would expose the 50-day SMA near 201.43, followed by a strong confluence zone around the 100-day SMA at 199.97 and the psychological 200.00 level, which also aligns with the horizontal floor of the previous consolidation phase.
Holding above this region keeps the broader bias constructive, while a decisive break below 200.00 could hand near-term control to sellers and open the door for a deeper retracement toward 199.00 and 198.50.
On the upside, the 204.00 area, near this week’s highs, marks immediate resistance. A decisive break above that threshold would likely propel GBP/JPY toward fresh year-to-date highs above 205.33.
Momentum indicators reflect a pause in trend strength. The Relative Strength Index (RSI) is neutral around 54, and the Average Directional Index (ADX) remains subdued, suggesting a brief consolidation phase may unfold before the next directional move.
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.
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