GBP/JPY Facing Downward Pressure Amid Strengthening Yen

24/02/2025

Market Overview

GBP/JPY continues to face selling pressure as the Japanese yen strengthens, driven by the Bank of Japan’s (BoJ) increasing inclination toward a more hawkish stance. Despite Japanese markets being closed for the Emperor’s Birthday holiday, the yen maintained its upward trajectory against the pound as investors anticipate further rate hikes from the BoJ this year. Meanwhile, European currencies opened the London session weaker, adding to the downside pressure on GBP/JPY. With no significant economic releases to provide immediate directional catalysts, price action is largely dictated by broader market sentiment and technical positioning.

Technical Analysis

On the four-hour chart, GBP/JPY remains entrenched in a two-month downtrend, characterized by lower highs and lower lows. The pair recently rejected the 34-period and 100-period moving averages, reinforcing the ongoing bearish sentiment. Currently, sellers are testing support at 188.677, a key level that, if broken, could open the door for further downside. The next potential targets for the bears lie at 188.063, 187.281, and 186.418, aligning with extended Fibonacci retracement levels.

Momentum indicators further support the bearish case. The Relative Strength Index (RSI) is trending lower, signaling growing selling momentum. The Moving Average Convergence Divergence (MACD) histogram remains in negative territory, confirming continued downside bias. Additionally, the 34-period moving average has crossed below the 100-period moving average, reinforcing the increasing downside momentum.

Should buyers regain control, the pair will first need to reclaim 189.540 as initial resistance. A break above 190.936, the previous swing high, is necessary to invalidate the bearish outlook and shift momentum back in favor of the bulls.

Key Technical Levels

Resistance Levels: 189.540, 190.936
Support Levels: 188.677, 188.063, 187.281, 186.418

Fundamental Drivers

With no major economic releases scheduled for Monday, GBP/JPY’s price action is expected to be primarily driven by market sentiment and technical positioning. Investors remain focused on the BoJ’s evolving stance on monetary policy, with expectations that rate hikes may continue throughout the year. Any developments regarding global risk sentiment or unexpected policy signals from the BoJ or the Bank of England could trigger additional volatility in the pair.

Conclusion

GBP/JPY continues to face downward pressure, with technical indicators pointing to further weakness as long as the pair remains below key resistance levels. If sellers manage to break below 188.677, a move toward lower support levels appears likely. In contrast, a recovery above 190.936 would be required to shift the market sentiment toward a more bullish outlook.