Insights 
VT 
The GBP/JPY currency pair has bounced back, reaching past 203.00 after hitting Friday’s low of 201.85. Political uncertainty in Japan is affecting the Yen’s value, with GBP/JPY aiming to breach the 203.50 resistance level to confirm a potential trend shift.
In technical analysis, the Pound’s recovery found support near the 38.2% Fibonacci retracement below 202.00. The 4-Hour RSD has moved above the key 50 level, and the MACD is gaining strength, suggesting easing bearish pressure. Bulls need to break through 203.50 to confirm a trend change, with further resistance at 204.55 and 205.20.
Immediate Support Levels
Immediate support is at 201.85, with deeper levels at the 50% and 61.8% Fibonacci retracement levels at 201.35 and around 200.30, respectively. Meanwhile, the Japanese Yen is weaker against major currencies, with the largest decline against the New Zealand Dollar. The Yen showed a percentage change of -0.23% against the US Dollar and a -0.18% change against the British Pound.
The currency heat map displays percentage changes of Yen against major currencies, where the Yen has shown varied strengths and weaknesses depending on the currency pairing. Overall, the Yen is under pressure today.
The immediate focus for us is the 203.50 resistance level in GBP/JPY. A sustained break above this point would signal a bullish trend shift, making it an ideal trigger for considering call options. We see this as a key battleground that will likely determine the pair’s direction for the rest of October.
The Yen’s weakness is being fueled by Japan’s political disarray, as the Komeito party exits the ruling coalition. We’ve seen similar instability in the past, such as during the frequent leadership changes of the late 2000s, which often preceded a period of policy paralysis and a weaker yen. Recent polls from major news outlets already show public approval for the new government is below 30%, suggesting this uncertainty will continue to pressure the currency.
Market Factors Influencing Yen
However, we must watch the broader market sentiment, as escalating US-China trade tensions are pushing gold toward record highs near $4,100. This kind of global risk-off environment typically strengthens the yen as a safe-haven asset, creating a direct conflict with its domestic political weakness. The VIX index, a key measure of market fear, has surged over 40% in the last month, climbing back above 22 and confirming widespread market anxiety.
Given these opposing forces, we believe implied volatility in GBP/JPY options is underpriced and presents an opportunity. A long straddle strategy, involving the purchase of both a call and a put option at the same strike price, could be effective. This position profits from a significant price move in either direction, which seems likely once either the political or global risk narrative dominates.
On the other hand, if resistance at 203.50 holds firm, we should be prepared for a bearish move driven by global safe-haven flows. We would then look at buying put options targeting the support levels around 201.85 and then 201.35. A failure at this key resistance would indicate that fear over trade wars is outweighing Japan’s internal political issues for now.
