During Wednesday's Asian trading session, the GBP/JPY pair extended its gains, rising to around 215.35 and setting a new one-week high, approaching levels last seen in previous multi-year peaks. The pair has now advanced for three consecutive trading days, indicating that bullish momentum remains dominant.
Fundamentally, market focus is centered on upcoming UK inflation data. As a key measure of price levels, the Consumer Price Index (CPI) will directly influence expectations for the Bank of England's policy path. Market consensus suggests that the BoE is likely to maintain a relatively tight policy stance in the future, with room for further interest rate hikes. Expectations of at least a 25-basis-point rate increase by the BoE are providing solid support for the pound. Meanwhile, the Japanese yen continues to face pressure. On one hand, energy risks stemming from the Middle East situation are heightening uncertainty for Japan's economy. As a major energy importer with high reliance on external supplies, potential disruptions to energy transportation could increase import costs and weaken the yen's performance. On the other hand, the Bank of Japan maintains an accommodative policy stance, with markets anticipating it will keep interest rates unchanged in the near term, further widening the interest rate differential with other economies and weighing on the yen. Against this backdrop, the fundamental divergence between the pound and yen continues to widen, supporting the upward trend in the exchange rate. From a market sentiment perspective, investors show greater preference for higher-yielding currency assets over low-yielding yen, with these capital flows further reinforcing the upward momentum in GBP/JPY.
Technically, daily charts show GBP/JPY maintaining a strong upward trend. After finding support near the 100-day exponential moving average, the pair rebounded and successfully broke through the key resistance zone of 213.10-213.15, confirming the continuation of the uptrend. The price is currently approaching the 216 level, which represents a critical short-term resistance zone. A break above this level could push the pair into higher trading ranges, potentially setting new long-term highs.
Momentum indicators show the RSI holding near 64, remaining in bullish territory and indicating steady upward momentum without entering extreme overbought conditions. The MACD indicator continues to operate above the zero line, suggesting the bullish trend remains intact. These signals indicate that while short-term consolidation is possible, the overall trend remains biased to the upside.
From a 4-hour chart perspective, the pair demonstrates a steadily rising structure with progressively higher highs and lows, indicating a clear short-term trend. The price has repeatedly found support when testing the 213.50-214.00 area, showing strong buying interest in this zone. The 210.60 region constitutes a key medium-term support level, coinciding with the 100-day moving average. A break below this level could signal a trend change. Current technical structure suggests any pullback is more likely to represent a correction rather than a reversal.
Overall, GBP/JPY is currently in an upward phase supported by both fundamental and technical factors. While markets await key data confirmation, bullish forces maintain control.
In summary, GBP/JPY maintains strength supported by both fundamental and technical factors, with contrasting expectations for UK rate hikes and Japan's accommodative policy providing sustained upward momentum. In the short term, markets will focus on UK inflation data to gauge policy direction and exchange rate movement. Strong data could push the pair above 216 for further gains, while weaker figures might trigger technical corrections, though the overall trend remains bullish.
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