GBP/JPY Price Forecast: Bulls reclaim 50-day SMA, eye 217.00

The GBP/JPY currency pair is set to conclude Monday's trading session with an increase of more than 0.14%, as market players anticipate the onset of Tuesday's Asian trading session. The pair has surpassed the 50-day Simple Moving Average (SMA) at 215.52, which typically signals an upward trend. At the moment, GBP/JPY is trading slightly below 216.00.

The pair has recently reached a ten-day high of 216.16, but is unable to maintain its position above 216.00. However, the momentum has turned positive, as evidenced by the Relative Strength Index (RSI). Despite remaining bullish, the RSI has become flat, suggesting further consolidation before a potential upward movement.

Should GBP/JPY surpass 216.00, traders may anticipate a rise towards a downward resistance trendline situated between 217.50/65. Should the value climb above this area, the subsequent targets would be 217.00, followed by the highest price achieved during the July 9 session (HOD) at 218.01. In contrast, if GBP/JPY declines beneath the 50-day SMA, a downward trajectory towards the 100-day SMA of 214.65 may occur.

This would expose the 200-day SMA at 212.32. The Japanese Yen (JPY), one of the world's most actively traded currencies, is predominantly influenced by the performance of the Japanese economy, the Bank of Japan's policies, the divergence between Japanese and US bond yields, and the overall risk sentiment among traders.

The Bank of Japan (BoJ) plays a crucial role in determining the value of the Japanese Yen. As part of its mandate, the BoJ is responsible for currency control, which has often led to the Yen's depreciation against its main currency counterparts. The BoJ's ultra-loose monetary policy from 2013 to 2024 contributed to the Yen's decline due to a growing policy divergence between the Bank of Japan and other major central banks. Recently, the gradual unwinding of this ultra-loose policy has provided some support to the Yen.

Throughout the past decade, the BoJ's commitment to ultra-loose monetary policy has fueled a widening policy divergence with other central banks, particularly the US Federal Reserve. This divergence has supported a widening differential between the 10-year US and Japanese bonds, benefiting the US Dollar against the Japanese Yen. The BoJ's decision in 2024 to gradually discontinue the ultra-loose policy, combined with interest rate cuts in other significant central banks, is narrowing this differential.

The Japanese Yen is often regarded as a safe-haven investment, implying that during periods of market turmoil, investors are more likely to allocate their funds to the Japanese currency due to its perceived reliability and stability. Consequently, turbulent situations may strengthen the Yen's value relative to other currencies perceived as riskier to invest in.