GBP/JPY Price Forecast: Bulls eye 217.00 as rally extends

The GBP/JPY currency pair advanced over 0.72%, reaching a 14-day high of 216.90. Traders are now targeting a breakout above 217.00, potentially triggering a retest of mid-July's yearly highs. The GBP/JPY pair currently trades at 216.73, bouncing off its daily low of 215.04. Technical analysis suggests a constructive outlook, as GBP/JPY broke the previous week's high of 216.22, opening the door to further upside.

Momentum began to strengthen, as indicated by the Relative Strength Index (RSI), which remained flat during the last two trading sessions.

The initial resistance level is at 217.00, with a breach of this mark exposing the July 10 high of 218.69, followed by the July 15 high of 219.61. Conversely, a decline below 216.00 could see GBP/JPY test the 50-day Simple Moving Average (SMA) at 215.60, followed by the 100-day SMA at 214.81, and the 200-day SMA at 212.51.

The Japanese Yen (JPY) is a widely traded currency, with its value determined by the performance of the Japanese economy, the Bank of Japan's policy, the differential between Japanese and US bond yields, or risk sentiment among traders. The Bank of Japan's (BoJ) mandate includes currency control, and its moves are crucial for the Yen's value.

The BoJ has intervened in currency markets occasionally, generally to lower the Yen's value, although this occurs infrequently due to political concerns from major trading partners. The BoJ's ultra-loose monetary policy between 2013 and 2024 led to the Yen depreciating against its major currency counterparts due to an increasing policy divergence between the Bank of Japan and other central banks. Recently, the gradual unwinding of this ultra-loose policy has provided support for the Yen.

The BoJ's commitment to ultra-loose monetary policy for a decade has resulted in a widening policy divergence with other central banks, particularly the US Federal Reserve. This has supported the US Dollar against the Japanese Yen. However, the BoJ's decision in 2024 to gradually abandon the ultra-loose policy, along with interest rate cuts by major central banks, is narrowing this differential.

The Japanese Yen is often considered a safe-haven investment, as investors tend to allocate more funds to the currency during market stress due to its perceived reliability and stability. Turbulent times may strengthen the Yen's value compared to other riskier currencies.