GBP/JPY is trading near 209, up 0.32% on the day, but remains confined to a narrow range after a sharp rally in the Japanese Yen earlier this month. The subdued price action comes as traders await major central bank decisions, with the Bank of England (BoE) set to announce its policy decision on Thursday and the Bank of Japan (BoJ) following on Friday [1].
The BoE is widely expected to keep interest rates unchanged at 3.75% for the sixth consecutive meeting. However, market attention is focused on the vote split, as the previous meeting saw a 6-3 division, with three policymakers favoring a 25-basis-point hike due to inflation risks from elevated oil prices. Persistent high energy prices, linked to the war in the Middle East, continue to cloud the inflation outlook, and markets are positioned for a potential rate increase in the coming months. A more hawkish vote split could support the British Pound [1].
Conversely, traders are convinced that the BoJ will raise interest rates for the second time this year, potentially taking the policy rate to 1.25%. Expectations that the BoJ could accelerate the pace of tightening, rather than waiting six months between moves, fueled sharp gains in the Japanese Yen at the start of September. GBP/JPY is down roughly 3.50% so far this month, and the cross could face renewed selling pressure if the BoJ signals a faster pace of rate hikes. A more cautious BoJ stance could allow GBP/JPY to recover some recent losses [1].
Technical analysis indicates that GBP/JPY retains a bearish near-term bias, trading below key moving average and Fibonacci resistance levels. The Relative Strength Index (RSI) has only modestly recovered from oversold territory near 33, while the MACD remains negative and the ADX at around 38 signals a strong downtrend. Immediate resistance is at the 23.6% Fibonacci retracement at 209.32, with further resistance at 210.69 and 211.79. On the downside, support lies at the recent swing low around 207, with a break below exposing 204.50 and the psychological 200 mark [1].
CONCLUSION
GBP/JPY remains under pressure as markets await key policy decisions from the BoE and BoJ. The cross is vulnerable to further downside if the BoJ signals a more aggressive tightening path, while a hawkish BoE vote split could offer some support to the Pound. Technical indicators reinforce the bearish outlook in the near term.