GBP/JPY Price Forecast: Momentum stabilizes, but lacks bullish conviction

GBP/JPY edges higher on Monday as the Japanese Yen (JPY) stays under pressure across the board in thin trading conditions. Japanese markets are closed until Thursday for the country’s Silver Week holidays. At the time of writing, the cross trades around 210.55, extending gains for a second straight day.

The Yen fell sharply on Friday after the Bank of Japan (BoJ) raised its policy rate by 25 basis points (bps) to 1.25%. Traders viewed the decision as dovish because two policymakers voted against the increase, while Governor Kazuo Ueda offered limited guidance on the timing of the next move.

The Bank of England’s (BoE) decision to keep interest rates unchanged at 3.75% last week also weighed on the British Pound (GBP). However, persistent Yen weakness is overshadowing the pressure on Sterling and keeping GBP/JPY supported.

A wide interest-rate gap and elevated Oil prices amid war in the Middle East continue to weigh on the Yen. The Yen’s decline has also brought intervention risk back into focus. Reports that BoJ conducted a rate check during Friday’s American trading hours added to speculation that officials could step again into the foreign exchange market if the currency weakens rapidly.

Looking ahead, the economic calendar is relatively light this week. Preliminary Purchasing Managers' Index (PMI) data from the United Kingdom (UK) and Japan will be closely watched for fresh signs of economic activity. Traders will also watch speeches from BoE officials for more clues about the interest-rate outlook.

Technical Analysis

On the daily chart, GBP/JPY keeps a bearish near-term tone as spot holds beneath the 50-, 100- and 200-day Simple Moving Averages (SMAs) clustered between roughly 213.00 and 214.50. The pair is hovering just under the 38.2% Fibonacci retracement at 210.65, underscoring a capped recovery, while the Relative Strength Index around 44 hints at subdued demand despite a slightly positive Moving Average Convergence Divergence (MACD) reading near the zero line, which only suggests tentative stabilization rather than a clear bullish reversal.

On the topside, initial resistance appears at the 38.2% retracement at 210.65, followed by the 50.0% level at 211.76 and the 61.8% retracement at 212.87, before a denser barrier formed by the 200-day SMA at 213 and the 50- and 100-day SMAs around 214.30-214.35, with the 78.6% retracement at 214.46 and the prior swing high zone near 216.47 acting as higher caps.

On the downside, the 23.6% Fibonacci retracement at 209.27 offers initial support, ahead of the structural floor around 207.05, where the lower Fibonacci anchor aligns with the recent cycle low.