GBPJPY: Dovish BoE vs. Cautious BoJ – Key Turning Point Ahead

Summary – GBPJPY

• Current Price Range: ~191.50–192.50
• Immediate Resistance: 193.00 (multi-year high)
• Support Levels: 190.00 (psychological), 189.50 (previous swing low)
• Momentum: Overbought conditions ease; a near-term pullback is possible if risk appetite weakens or yield spreads narrow.

The pair remains in a strong uptrend but is testing critical resistance near 193.00. RSI divergence and waning bullish momentum suggest a possible pullback, especially if dovish BoE expectations grow or the BoJ surprises with policy tightening. A break below 190.00 could trigger a deeper correction toward 189.50 and 188.30.

Fundamental Drivers

United Kingdom – BoE Holds, But Opens the Door for Easing

• BoE held rates at 5.25% in May, but the tone shifted more dovish as inflation reached target-consistent levels.
• Services inflation remains sticky, but markets now fully price in a 25 bp rate cut by August, putting downward pressure on GBP sentiment.
• Tepid growth and soft consumer data justify a more cautious BoE outlook, increasing downside risks for the pound.

Japan – BoJ Edging Toward Normalization

• The BoJ is slowly unwinding ultra-loose policy, with April's yield curve control tweak and rising JGB yields signaling a hawkish tilt.
• Market participants increasingly anticipate a July rate hike, supported by rising inflation expectations and improving wage trends.
• A shift toward tightening in Japan could lift the yen, especially if global risk sentiment sours.

Risk Sentiment & Yield Spreads

• GBPJPY is highly sensitive to bond yield differentials: the UK 10-year Gilt vs. Japanese 10-year JGB spread remains a key driver.
• Due to its safe-haven status, a risk-off environment (e.g., equity selloffs or geopolitical stress) would likely strengthen the yen.
• Continued equity strength may cushion GBPJPY from steep declines in the near term, but rising BoJ hawkishness could tilt the balance.

GBPJPY – D1 Timeframe

The daily timeframe chart of GBPJPY presents a critical argument in favor of the bearish trend based on the trendline resistance, the Fibonacci retracement levels, and the Fair Value Gap above the liquidity inducement. Let's now see the lower timeframe sentiment.

GBPJPY – H4 Timeframe

The 4-hour timeframe chart of GBPJPY reveals a hidden SBR pattern between the three peaks at the top of the market structure. We can also identify the FVG and inducement areas, with a resistance trendline overlapping the supply zone.

Analyst's Expectations: 

Direction: Bearish

Invalidation- 199.700

Target- 189.060

CONCLUSION

You can access more trade ideas and prompt market updates on the Telegram channel.