GBP/JPY Price Forecast: Rebounds above 208.00, but weak RSI momentum persist

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The GBP/JPY cross holds positive ground near 208.25, snapping the four-day losing streak during the early European session on Friday.

GBP/JPY gains ground to around 208.25 in Friday’s early European session.
The cross keeps positive outlook in medium term; further downside cannot be ruled out in near term amid weak RSI momentum.
Initial support emerges at 207.65; first upside barrier is located at 211.80.

The GBP/JPY cross holds positive ground near 208.25, snapping the four-day losing streak during the early European session on Friday. However, the potential upside might be limited amid hopes that Japan's Prime Minister Sanae Takaichi could be more fiscally responsible and that her policies will boost the economy.

Bank of Japan (BoJ) board member Naoki Tamura on Friday reinforced the case for further policy normalization. Tamura further stated that inflation in Japan is becoming increasingly sticky and that the central bank may soon be in a position to judge its 2% price target as sustainably achieved.

Technical Analysis:

In the daily chart, GBP/JPY holds narrowly above the 100-EMA, preserving the medium-term bullish structure. Dips remain supported while that average is intact. Price slips below the lower Bollinger Band, flagging an oversold stretch as the bands widen, pointing to elevated volatility. RSI (14) at 37.07 stays below 50, indicating weak momentum with a modest uptick from recent lows.

Initial support is seen at the 100-EMA at 207.65. Further stabilization would pivot focus to resistance at the 20-day midpoint and the outer band. A return inside the Bollinger envelope would refocus 211.80, while a push in RSI back toward 50 would strengthen recovery prospects. A close above the middle band would open scope for a broader corrective bounce.

(The technical analysis of this story was written with the help of an AI tool.)

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.