211.10 in bulls’ sights: GBP/JPY Price Forecast as bearish trend continues

209.13 marks the rebound point for GBP/JPY as buyers hold former trendline resistance.
With RSI nearing bullish territory, short-term buying momentum is gaining strength.
211.10 is the breakout level that would bring 212.00 and the 200-day SMA at 212.95 into view.

GBP/JPY gains over 0.20% on Monday. Risk appetite is positive amid prospects of de-escalation in the Middle East conflict, while US equities trade higher and AI company Anthropic files for an IPO. After testing a six-day low of 209.13, the cross trades above 210.00.

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GBP/JPY Price Forecast: Technical Levels in Focus

A break above descending trendline resistance in mid-October lifted GBP/JPY to a one-month high of 211.99. The cross has since pulled back towards the psychological 210.00 level, with its broader bias still pointing downwards.

Only a recovery above the 25 August high of 217.48 would disrupt GBP/JPY's established pattern of lower highs and lower lows.

The Relative Strength Index (RSI) is climbing towards bullish territory, with momentum pointing to additional gains.

A break above 211.00 could take GBP/JPY towards its 50-day Simple Moving Average (SMA) at 211.10. Further gains would bring 212.00 into focus, then the 200-day SMA at 212.95.

Conversely, a fall below the 23 October low of 209.13 would leave GBP/JPY vulnerable to a test of 209.00. Below that level, the next support lies at 209.00 on a trendline that previously acted as resistance. Losses could then extend towards the 30 September low of 206.89.

GBP/JPY Daily Price Chart

Pound Sterling: Key Questions

What defines the Pound Sterling?

Dating back to 886 AD, the Pound Sterling (GBP) is the world's oldest currency and the United Kingdom's official currency. According to 2022 data, it ranks fourth in global foreign exchange (FX) trading, representing 12% of all transactions with average daily turnover of $630 billion. Its main trading pairs include GBP/USD, known as ‘Cable’, with an 11% share of FX trading; GBP/JPY, called the ‘Dragon’ by traders, at 3%; and EUR/GBP at 2%. The Bank of England (BoE) issues the Pound Sterling.

How does Bank of England policy affect the Pound Sterling?

Monetary policy set by the Bank of England is the biggest influence on the Pound Sterling's value. Policy decisions depend on progress towards the BoE's main objective of “price stability” – inflation holding steady at around 2%. Interest rate adjustments are its principal means of achieving that goal. To curb excessively high inflation, the BoE raises interest rates, increasing borrowing costs for households and businesses. GBP generally benefits because higher rates make the UK more attractive to international investors seeking somewhere to place their funds. Inflation that falls too low signals weaker economic growth. The BoE would then consider cutting interest rates to reduce credit costs, encouraging businesses to borrow more for investment in projects that generate growth.

What role do economic releases play in Sterling's value?

By revealing the economy's health, data releases can move the Pound Sterling. GDP, Manufacturing and Services PMIs, and employment figures are among the indicators that can shape GBP's direction. Sterling benefits from a robust economy through greater foreign investment and the possibility of BoE interest rate increases, which would directly strengthen GBP. Weak economic readings, by contrast, are likely to weigh on the Pound Sterling.

Why does the Trade Balance matter for Sterling?

The Trade Balance is another important release for the Pound Sterling. Over a specified period, it compares a country's export earnings with its spending on imports. Strong overseas demand for a country's exports creates additional demand for its currency as foreign buyers purchase those goods. A positive net Trade Balance therefore supports the currency, while a negative balance has the opposite effect.