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GBP/JPY Slips as Yen Strengthens Amid BoJ Caution and UK Policy Divergence
Traders' Opinions
Summary:
The GBP/JPY retreated toward 198.50 on Thursday as the yen gained ground despite rising domestic uncertainties flagged by a Bank of Japan policymaker.
Sell
CLOSEDGBPJPY
End Time
198.600
Entry Price
197.560
TP
199.300
SL
198.555 +0.060 +0.03%
436
Points
Profit
197.560
TP
198.164
CLOSING
198.600
Entry Price
199.300
SL
The British pound weakened against the Japanese yen in European trading on Thursday, with the GBP/JPY pair sliding toward 198.50 as renewed yen strength pressured the cross. The move comes against a backdrop of heightened global trade tensions, cautious rhetoric from Japanese policymakers, and diverging central bank outlooks between Tokyo and London.
The yen outperformed most of its peers, surprising some traders who had expected the currency to remain subdued given persistent concerns over Japan’s fragile recovery. The rally was sparked after Bank of Japan (BoJ) board member Junko Nakagawa struck a cautious tone, warning that U.S. tariffs on Japanese imports are clouding the domestic outlook.
Nakagawa emphasized that “there remain many uncertainties” despite the U.S. and Japan having reached a trade agreement aimed at easing tensions. He warned that Washington’s tariff stance is weighing on “business and household sentiment,” dampening the mood in Japan’s export-oriented economy. While such remarks might normally weigh on the yen by signaling a more dovish stance, investors appeared to seek safety in the Japanese currency, interpreting the cautious outlook as a reason to temper expectations of further BoJ tightening in the near term.
The sense of uncertainty was compounded by news that Japan’s chief trade negotiator, Ryosei Akazawa, canceled a planned visit to Washington. The trip was intended to present details of Tokyo’s proposed $550 billion investment package, designed in part to secure tariff relief from the United States. The cancellation not only adds to doubts about the trajectory of U.S.-Japan trade relations but also leaves markets guessing about the broader impact on Japan’s export sector, which has already shown signs of strain.
In the UK, the pound also came under pressure despite comments from Bank of England Monetary Policy Committee member Catherine Mann, who reinforced her hawkish stance. Mann reiterated that interest rates should remain elevated for longer to counter persistent inflationary pressures, signaling little appetite for near-term easing. However, the pound failed to gain traction, as investors questioned whether the BoE’s hawkish tone would be sufficient to offset domestic growth concerns and the rising risk of policy divergence with other major central banks.
For currency traders, the dynamics in GBP/JPY reflect a tug-of-war between safe-haven demand for the yen and lingering uncertainty over how long sterling can find support from hawkish BoE rhetoric. With U.S. tariffs casting a shadow over Japan’s outlook and the UK economy showing signs of strain from higher borrowing costs, neither side of the pair looks convincingly strong in the medium term.
The yen’s rally may also have been aided by broader risk aversion across global markets. Investors increasingly appear to be treating the currency as a defensive hedge against trade policy uncertainty, even as the BoJ’s tightening cycle remains far less aggressive than that of its peers.
Technical Analysis
From a technical perspective, GBP/JPY recently broke out of a symmetrical triangle pattern and is now reacting to resistance near 198.60 — a level that marks the current sell entry. The failure to sustain momentum above this area suggests renewed downside pressure.
We are eyeing 197.56 as the next major target, a level that coincides with pullback support and the 50% Fibonacci retracement, while the stop-loss level sits at 199.30, aligned with swing-high resistance. A sustained move below 198.50 could open the door for further losses, particularly if yen demand remains resilient.
TRADE RECOMMENDATION
SELL GBPJPY
ENTRY PRICE: 198.60
STOP LOSS: 199.30
TAKE PROFIT: 197.56
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