Introduction

GBP/JPY continues to trade with a bullish bias as the Japanese yen remains under pressure from the Bank of Japan’s ultra-loose monetary stance. Meanwhile, the UK pound is supported by relatively higher yields and stabilising growth data, though soft consumer demand and weak services momentum cap upside. With price action holding above key Ichimoku cloud support, the technical picture suggests buyers are still in control while fundamentals tilt the pair higher.

Fundamental Analysis

The Japanese yen remains the weakest of the major currencies. The Bank of Japan has reiterated its commitment to maintaining accommodative policy, keeping rates at negative or near-zero levels while continuing bond purchases. Inflation in Japan is moderating but remains below the sustained levels that would force a decisive policy shift, leaving the yen exposed to interest rate differentials.

In contrast, the UK maintains relatively higher yields despite slowing growth. Inflation has eased, but the Bank of England has been cautious about cutting rates too quickly given sticky services inflation and wage pressures. This divergence continues to provide GBP with an advantage over JPY in the carry trade space. However, weak consumer sentiment and sluggish GDP growth leave the pound vulnerable if global risk appetite fades.

Sentiment Analysis

Positioning data shows retail traders heavily skewed towards long JPY across major crosses, leaving GBP/JPY with contrarian upside potential. COT futures confirm net yen shorts remain entrenched, while pound sentiment is neutral to mildly bullish. Rate expectations continue to favour GBP, with yield spreads pointing higher. Geopolitical tensions and risk-off episodes could give JPY temporary strength, but the broader trend supports GBP outperformance.

Technical Analysis

The daily chart shows GBP/JPY consolidating above the Ichimoku cloud, with support anchored at 197.00. The conversion line sits near 199.07, acting as resistance, while the base line at 197.65 offers a strong cushion. RSI is neutral at 49, suggesting consolidation before another leg higher. MACD remains positive, though momentum has flattened, signalling a pause rather than reversal. Volume trends are steady with no signs of distribution.

Key support: 197.00
Key resistance: 200.00

A daily close below 197.00 would weaken the bullish structure, but while price holds above this level, the bias remains higher with potential retest of 200.00 and beyond.

Conclusion

GBP/JPY remains one of the stronger yen crosses as wide rate differentials persist. The pair is technically supported above cloud levels, with sentiment and fundamentals aligned in favour of sterling. Short-term consolidation is likely, but the bias remains bullish towards 200.00 unless 197.00 gives way.