GBP/JPY Price Forecast: Bulls target 211.10 despite ongoing bearish trend

Buying support at the former resistance trendline lifts GBP/JPY from 209.13.
Short-term buying momentum strengthens as RSI nears bullish territory.
A move through 211.10 would bring 212.00 and the 200-day SMA at 212.95 into focus.

Positive market sentiment supports GBP/JPY on Monday, with the pair gaining over 0.20% as prospects of a de-escalation in the Middle East conflict coincide with gains in US equities and an IPO filing by AI company Anthropic. Having tested a six-day low of 209.13, the cross now trades above 210.00.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

GBP/JPY Price Forecast: Can the recovery overcome the bearish technical bias?

A bearish bias persists in GBP/JPY despite its mid-October break above a descending resistance trendline. That breakout had lifted the cross to a one-month high of 211.99, after which it pulled back towards its current levels around the psychological 210.00 mark.

Only a push by buyers above the 25 August high of 217.48 would invalidate the existing pattern of lower highs and lower lows in GBP/JPY.

Further gains are suggested by momentum, with the Relative Strength Index (RSI) moving upwards and close to entering bullish territory.

A break above 211.00 could take GBP/JPY towards its 50-day Simple Moving Average (SMA) at 211.10. Beyond that level, 212.00 would be the next target, ahead of the 200-day SMA at 212.95.

Conversely, a fall below the 23 October low of 209.13 would leave GBP/JPY open to a test of 209.00. A breach would bring the next support, a former resistance trendline now acting as support at 209.00, into play. Losses could subsequently extend towards the 30 September low of 206.89.

GBP/JPY Daily Price Chart

Pound Sterling: Frequently Asked Questions

What should you know about the Pound Sterling?

The United Kingdom's official currency, the Pound Sterling (GBP), is the world's oldest currency, dating back to 886 AD. Based on 2022 data, it ranks fourth among currencies traded in the foreign exchange (FX) market, representing 12% of all transactions and average daily turnover of $630 billion. Among its principal currency 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%. The Bank of England (BoE) issues the Pound Sterling.

Why do Bank of England decisions matter for the Pound Sterling?

Monetary policy set by the Bank of England has the greatest influence on the Pound Sterling's value. In making policy decisions, the BoE assesses whether it has met its central objective of “price stability” – inflation holding steady at around 2%. Adjusting interest rates is its main means of pursuing that objective. To curb excessively high inflation, the BoE will seek to raise interest rates, increasing borrowing costs for households and businesses. GBP generally benefits because higher rates make the UK a more appealing destination for global investors' funds. By contrast, inflation that falls too low signals slowing economic growth. The BoE will then consider cutting interest rates to make credit cheaper, encouraging businesses to borrow more and invest in projects that generate growth.

Why can economic releases move the Pound?

The Pound Sterling can react to economic releases because they provide a measure of the economy's health. GDP, Manufacturing and Services PMIs, and employment indicators can each shape GBP's direction. Sterling benefits from economic strength, which draws in more foreign 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.

Why is the Trade Balance important for the Pound?

The Trade Balance is another important release for the Pound Sterling, showing 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.