GBP/JPY Targets Driven by Safe-Haven Appeal

Fundamental Outlook

In today’s trading session, the British Pound to Japanese Yen pair (GBP/JPY) has been influenced by a series of economic and political factors. On one hand, ongoing concerns over global trade tensions and uncertainty surrounding U.S. monetary policy have strengthened the Japanese Yen as a safe-haven asset. On the other hand, the UK’s annual inflation rate for March eased to 2.6%, below expectations, increasing the likelihood of an interest rate cut by the Bank of England in May. However, inflation is forecasted to rise above 3% in April, driven by higher energy costs, taxes, and wages. Additional pressure on the British economy comes from increased labor costs and U.S. tariffs, which have weighed on UK exports.

Meanwhile, the Bank of Japan (BOJ) is expected to lower its economic growth forecast as the latest round of U.S. tariffs on Japanese imports—particularly affecting export-oriented sectors like automobiles and machinery—have raised fresh concerns. Nonetheless, the BOJ is likely to maintain its current interest rate at 0.5%, adopting a wait-and-see approach amid global uncertainties.

Technical Analysis

On the four-hour chart, GBP/JPY has delivered stronger bearish signals after breaking below a short-term ascending trendline and the critical 188.00 support level. This level, which aligned with the 61.8% Fibonacci retracement, failed to hold back the selling pressure, pushing the pair into the 187.70–187.80 range.

The Weighted Moving Average (WMA), currently at 188.62 with a downward slope, reinforces the medium-term bearish trend. Price action remains capped below this moving average, and past attempts to reclaim this level have failed, confirming sellers’ control.

Bollinger Bands indicate recent volatility contraction, suggesting that the market has entered a consolidation phase. However, a decisive break below the lower Bollinger Band could accelerate the bearish momentum.

Looking ahead, Fibonacci extension levels serve as key downside targets:

• 100% extension: 187.458 (current psychological support)
• 127.2% extension: 186.944 (first probable bearish target)
• 161.8% extension: 186.291 (second bearish target)
• 200% extension: 185.570 (final target if bearish momentum intensifies)

The Relative Strength Index (RSI) stands around 39, moving towards oversold territory, which reflects weakening buying power but hasn’t yet triggered a strong reversal signal. However, a dip below 30 could temporarily increase the risk of a corrective bounce.

The MACD indicator remains in negative territory, below the zero line, with a weak histogram and the signal line positioned above the MACD line—further confirming the ongoing bearish momentum.

From a price pattern perspective, the breakdown from a symmetrical triangle to the downside further validates the continuation of the bearish trend. Given the break of the short-term ascending trendline, this pattern likely serves as a bearish continuation formation.

Alternative Scenario

As long as the price remains below the 188.00 zone and technical indicators like RSI and MACD continue to support the bearish outlook, the broader view for GBP/JPY remains negative. Only a strong breakout above 188.20 could challenge this perspective and signal a potential shift in momentum.

Key Upcoming Economic Events

United Kingdom:

• April 25: Release of retail sales data, which will provide insights into consumer spending behavior and the impact of inflation on purchasing patterns.

Japan:

• April 24: Publication of the Consumer Price Index (CPI), which could influence market expectations regarding the BOJ’s monetary policy stance.
• April 30 – May 1: BOJ’s monetary policy meeting, where updates to economic growth and inflation forecasts are expected.

Conclusion

Given the ongoing bearish pressures driven by diverging monetary policies between the Bank of England and the Bank of Japan, alongside broader global economic uncertainties, the short-term outlook for GBP/JPY remains bearish. Investors are advised to closely monitor the upcoming economic releases, as deviations from forecasts could lead to heightened volatility and shift market sentiment.

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