Technical Outlook
Market participants remain cautious about large JPY short positions. USD/JPY is near 160.00, a level linked to speculation about possible Tokyo intervention to limit JPY weakness. GBP/JPY has a mildly bullish trend after bouncing from 209.64 in late March, and it posted higher lows last week. A bullish engulfing daily candle could support a deeper correction if the pair closes above 211.45. On the 4-hour chart, RSI is holding just above 50 and MACD remains positive. Price action points to a Gartley C-D leg with targets at 212.30 and 212.55. Immediate support is the April 2 low at 210.35, then the March 31 low at 209.64. A correction on April 6 at 11:55 GMT changed the April 2 low to 210.35 from 212.35.Looking Back And Ahead
Looking back to this time in 2025, we saw optimism from a potential Iran ceasefire push GBP/JPY higher as investors moved away from safe-haven assets. That dynamic showed how sensitive this pair is to shifts in global risk sentiment. The technical picture then was pointing towards a break of the 211.45 resistance. Today, the situation is driven less by a single geopolitical event and more by fundamental divergence, with GBP/JPY pushing towards 215.00. Recent data from the Office for National Statistics shows UK core inflation remains sticky at 3.4%, keeping the Bank of England from signalling rate cuts. Meanwhile, Japan’s latest Tankan survey revealed a dip in business confidence, reinforcing the case for the Bank of Japan to maintain its accommodative stance. The primary risk, much like in 2025, is intervention from Tokyo, although the threat is now more intense. With USD/JPY currently trading above 162.00, we are well beyond the 160.00 level that caused significant market anxiety last year. This makes building large short positions in the yen increasingly dangerous, as Japanese officials have issued several verbal warnings in the past month. For traders wanting to stay long on GBP/JPY, using derivatives to manage this sudden risk is crucial in the coming weeks. Buying GBP/JPY call options allows for participation in further upside while capping potential losses if the Ministry of Finance intervenes to strengthen the yen. This provides a defined-risk way to follow the bullish trend. An alternative strategy is to position for the volatility itself, which has been steadily climbing. Purchasing a long straddle, which involves buying both a call and a put option at the same strike price, would profit from a sharp move in either direction. This is a practical approach for traders who believe the current tension will break with a significant price swing but are uncertain of the timing or direction. Create your live VT Markets account and start trading now.
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