Pound Sterling fell 0.36% on Thursday as risk aversion increased demand for the Japanese Yen. GBP/JPY traded at 209.09 after reaching a daily high of 209.55.
Renewed fears about disruption from AI pushed Wall Street lower. Gold, Silver and the US Dollar did not gain from the move into safer assets.
Technical Outlook Shifts
The broader trend remains upward, but the break below the 50-day simple moving average (SMA) at 210.87 shifted the outlook to neutral-bullish. Initial support is seen near a trendline in the 207.00 to 207.20 zone.
The Relative Strength Index (RSI) indicates bearish momentum, pointing to more short-term downside. If the pair drops below 207.00, support levels include the 100-day SMA at 206.85 and the 16 December swing low at 206.77.
If weakness continues, the next support is the 1 December low at 205.20. On the upside, a move above 208.50 brings resistance at 209.00, then 209.55, followed by 210.00.
Looking back at the analysis from this time in 2025, we saw the GBP/JPY pair trading around 209.00 amid fears of AI disruption that boosted the yen. That bearish momentum signal proved correct over the long term, as we now see the pair struggling below the 199.00 level. The technical breakdown that was just beginning then has since evolved into a clear downward trend.
Updated Macro Backdrop
Currently, the fundamental picture for the Pound Sterling is weak, providing little reason to expect a significant rally. UK inflation has cooled to 2.5%, a sharp drop from previous years, leading the Bank of England to openly discuss interest rate cuts for the second half of 2026. This monetary policy outlook puts a cap on any potential strength in the pound.
On the other side of the pair, the Japanese Yen has found a footing that was absent in early 2025. The Bank of Japan finally moved away from its negative interest rate policy late last year, and while its benchmark rate is only 0.10%, the policy divergence with a dovish Bank of England is stark. This shift continues to support the yen against the pound.
Given this backdrop, we should consider positioning for further downside or range-bound action in the coming weeks. Buying put options with strike prices below the 198.00 support level would directly benefit from another leg down. For those expecting the pair to stagnate below resistance, selling call options with a strike price near the psychological 200.00 mark is a viable strategy to collect premium.
