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GBP/JPY Correction Eyes 194.60 Support as BoJ Hawk Talk Lifts Yen
Economic
Summary:
GBP/JPY pulls back from a four-month high as the Japanese Yen gains strength on hawkish BoJ commentary. Despite UK economic growth optimism, the cross faces near-term headwinds.
Buy
CLOSEDGBPJPY
End Time
194.500
Entry Price
199.000
TP
191.000
SL
193.855 -0.498 -0.26%
452
Points
Profit
191.000
SL
194.952
CLOSING
194.500
Entry Price
199.000
TP
The GBP/JPY currency pair retreated sharply on Wednesday during the European session, falling from a four-month peak of 196.40 to around 194.45, as the Japanese Yen (JPY) reclaimed its footing on the back of hawkish remarks from a key Bank of Japan (BoJ) policymaker. The pullback comes despite expectations that the UK economy grew strongly in the first quarter of 2025, with markets bracing for the upcoming flash GDP data set to be released Thursday.
The volatility in GBP/JPY underscores the ongoing tug-of-war between diverging central bank outlooks and shifting macroeconomic narratives in both Japan and the United Kingdom. The retreat in the pair was sparked after BoJ Deputy Governor Shinichi Uchida said that interest rate hikes remain on the table, even as Japan continues to grapple with tepid inflationary momentum. According to Uchida, underlying inflation and long-term price expectations may remain subdued temporarily, but robust wage growth—driven by Japan’s ultra-tight labor market—should support the central bank’s goal of achieving sustainable inflation near its 2% target.
Speaking at an event covered by Reuters, Uchida reiterated the BoJ’s commitment to a cautious but firm tightening trajectory, which appears increasingly credible given that the Yen has struggled for months under the weight of ultra-loose monetary policy and global carry trade flows. His comments bolstered the Japanese currency, causing a broad-based bid in the Yen and exerting downward pressure on GBP/JPY.
Meanwhile, the British Pound (GBP) traded more cautiously, with investors awaiting key economic data from the United Kingdom. The preliminary GDP estimate for the January–March quarter is expected to show a 0.6% expansion—an impressive rebound from the sluggish 0.1% growth in Q4 2024. Such a figure would reinforce the view that the UK economy is stabilizing after a year marked by inflation volatility, soft demand, and post-Brexit trade adjustments.
However, despite signs of economic resilience, the Bank of England (BoE) appears to be nearing a dovish pivot. Labor market conditions have softened, with the Office for National Statistics reporting that the ILO unemployment rate rose modestly to 4.5%, while job additions slowed dramatically to just 112,000 in the most recent period—down from 206,000 previously. The cooling employment data supports the narrative that the BoE may proceed with gradual rate cuts in the coming months, especially as inflation pressures ease and household consumption remains fragile.
This growing divergence in central bank outlooks—BoJ tilting hawkish and BoE edging dovish—is likely to remain a defining theme for GBP/JPY dynamics in the near term.
Technical Analysis
From a technical standpoint, GBP/JPY’s retracement from 196.40 to 194.45 appears corrective rather than a trend reversal. Prior to the dip, the pair had broken through the 194.60 resistance level, initiating a strong bullish push toward the next key target at 196.60. The correction may find solid support around the 194.60 zone, which could now serve as a fresh base for a renewed upward leg.
As long as GBP/JPY maintains support above the 194.60–194.80 region, bullish momentum remains intact, with scope to retest 196.40 and potentially advance toward 197.35 and even 199.00 in the short-to-medium term. Momentum indicators, including RSI and MACD, continue to reflect a bullish bias, although short-term consolidation cannot be ruled out given the latest wave of Yen strength.
Today’s expected trading range is between 194.80 and 197.00, with a trend forecast that remains bullish unless a decisive break below 194.40 invalidates the current structure.
TRADE RECOMMENDATION
BUY GBPJPY
ENTRY PRICE: 194.50
STOP LOSS: 191.00
TAKE PROFIT: 199.00
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