Insights 
VT 
GBP/JPY has declined to a two-week low of approximately 200.68, with the British Pound underperforming due to UK fiscal worries and anticipated rate cuts. A drop below the 200.00 mark may lead to targets of 198.87, filling an October bullish gap.
Technically, GBP/JPY faces a key confluence zone near 200.00, aligned with the 50-day Simple Moving Average and former horizontal support. A double-top pattern could indicate a bearish reversal if the price strongly closes below this point.
Support and Resistance Levels
A break beneath 200.00 could prompt a pullback to October’s high of 198.87, with further support seen at 197.50. Resistance is near 202.16, the 21-day SMA, above which the pair might test 204.00 again.
Momentum indicators show a weakening trend, with the RSI around 44.8 suggesting bearishness. The MACD indicates a new bearish crossover, with its histogram in negative territory.
The BoJ’s policy decision on Thursday might induce volatility, as rates are expected to remain unchanged. In currency exchanges today, GBP advanced against the Swiss Franc but weakened against others, signified by various percentage fluctuations in the heatmap.
Market Dynamics and Strategy
We see the GBP/JPY cross is under significant pressure as it tests the critical 200.00 support level. This area acts as the neckline for a potential double-top formation, a classic bearish reversal pattern. A firm break below this zone in the coming days could confirm a shift in market momentum to the downside.
Concerns over the UK’s fiscal health are intensifying, especially after recent data from the Office for National Statistics for September 2025 showed government borrowing again overshot expectations. Furthermore, the latest UK CPI data, while still elevated at 3.1%, showed a continued cooling trend, which is leading markets to price in a higher probability of a Bank of England rate cut in early 2026. This monetary policy outlook is a key driver weighing on the Pound.
On the other side of the trade, the Bank of Japan is expected to maintain its cautious stance and hold rates steady this week. The BoJ remains hesitant to tighten policy aggressively, having only ended its negative interest rate policy back in early 2024. This policy divergence between a potentially dovish BoE and a neutral BoJ further supports a weaker outlook for the GBP/JPY pair.
Given this backdrop, we should consider positioning for a downside move, particularly if we see a daily close below the 200.00 handle. Buying put options with a strike price around 199.00 or 198.50 could be a viable strategy to capitalize on a potential drop toward the 198.87 target. Shorting futures contracts would be another direct way to express this bearish view.
However, risk management remains essential, as this pair is notoriously volatile. A move back above the 21-day SMA at 202.16 would invalidate the immediate bearish thesis and could be used as a level for stop-losses. If that resistance breaks, we may need to quickly unwind short positions and consider call options to hedge against a reversal back toward 204.00.
