FX.co ★ GBP/JPY. Analysis and Forecast

Today, the GBP/JPY pair faces active selling following the release of UK consumer inflation data, continuing to retreat from a more than two-week high reached the previous day. For the second consecutive day, the decline is pulling spot prices toward a multi-day low, near the 193.60 level, amid expectations of a break below the 200-day simple moving average (SMA).

According to the UK's Office for National Statistics (ONS), the Consumer Price Index (CPI) remained unchanged in September, while the annual rate dropped to 1.7% from August's 2.2%. This marked the lowest level since April 2021, coinciding with recent comments by Bank of England Governor Andrew Bailey, who indicated that the Central Bank could cut interest rates more aggressively if additional positive inflation data surfaces. Markets quickly responded by factoring in a 90% probability that the Bank of England will lower borrowing costs in November, putting significant pressure on the British pound.

Additionally, the lack of details on China's overall fiscal stimulus created uncertainty among investors. Persistent geopolitical risks stemming from ongoing conflicts in the Middle East have heightened risk factors, as reflected by weaker sentiment in stock markets. However, this benefits the relative status of the Japanese yen as a safe-haven asset, adding further pressure on the GBP/JPY pair.

At the same time, uncertainties surrounding the Bank of Japan's potential interest rate hike plans are capping the yen's appreciation, potentially providing support for the currency pair.

From a technical perspective, the GBP/JPY pair has been fluctuating within a familiar range over the past two weeks. This suggests the formation of a rectangle pattern on the daily chart, indicating uncertainty regarding the next phase of directional movement.

The current mixed fundamental outlook suggests it would be prudent to wait for a more sustained period of selling pressure and a decisive break below the 200-day simple moving average before confirming that the bears have gained control. Especially since the oscillators on the daily chart have not yet turned bearish.