Forecast for the GBP/JPY Pair

GBP/JPY at the basic level

The GBP/JPY pair edged lower during today’s trading after reaching its highest level since the 2008 global financial crisis yesterday, as traders scaled back expectations of a Bank of England rate hike, buoyed by growing optimism that the conflict in the Middle East may be nearing an end.

Policy makers noted that there is no urgent need to tighten monetary policy, with Governor Andrew Bailey stating that it is too early to assess the war’s impact, describing it as a major energy shock whose duration will affect inflation.

Policy maker Megan Green also stated that markets were correct to lower their expectations for sharp interest rate hikes.

The conflict is expected to cast a shadow over the British economy, raising borrowing costs and inflation, and weakening growth prospects ahead of the monetary policy meeting scheduled for April 30.

Meanwhile, in Japan, the International Monetary Fund noted that the Bank of Japan may disregard inflation stemming from the Iran conflict, pointing out that its impact on core price pressures is likely to remain limited and will not derail the central bank’s gradual tightening path.

The yen also received support from lower oil prices and a weaker U.S. dollar, amid growing optimism regarding the possibility of reaching an agreement to end the conflict in the Middle East.

Pound/Yen at Technical Levels

The GBP/JPY pair retreated slightly today near the 215.40 level, pulling back from the high of 215.990.

On smaller time frames, the pair is attempting to form a head-and-shoulders pattern targeting 214.60 as an initial target, followed by 213.80.

This scenario would fail if the pair breaks above the 116.00 resistance level.