GBPJPY Under Pressure Amid Divergent Central Bank Paths

Traders are eyeing Friday’s high-impact data, with Canada’s Employment Change and the U.S. Non-Farm Employment Change, likely to drive volatility in CAD and USD pairs.
GBPJPY remains under bearish pressure after slipping below key moving averages, with technical indicators pointing to further downside risk.
On the macro front, the Bank of England’s rate cut to 4.5% and cautious growth outlook contrasts with the Bank of Japan’s tightening stance amid rising wage-driven inflation. These diverging policies are expected to influence currency movements ahead.

Friday 15:30 (GMT+2) – Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) – USA: Non-Farm Employment Change (USD)

Since peaking at 198.938 on December 30—marked by the formation of an Evening Star candlestick pattern—GBPJPY has experienced a notable pullback, slipping below the 50-period Exponential Moving Average (EMA). This downside movement has been underpinned by a mix of technical signals and broader market dynamics. The emergence of a failure swing reversal has amplified bearish sentiment, while the recent “Death Cross,” where the 20-period EMA crossed beneath the 50-period EMA, has further reinforced downward momentum.
Momentum indicators continue to paint a bearish picture. The Momentum Oscillator remains entrenched below the 100 marks, signaling persistent downside pressure. Meanwhile, the Relative Strength Index (RSI) holds well below the neutral 50 level, underscoring continued selling interest. These converging technical signals suggest that the pair could face additional downside risk in the near term, assuming no significant shift in market conditions.

Should the buyers take market control, traders may direct their attention toward the four potential resistance levels below:
189.318: The initial resistance level is identified at 189.318, aligning with the trough from January 17.
190.706: The second price target is set at 190.706, aligning with the weekly support, S1, calculated using the standard Pivot Points methodology.
192.672: The third price objective is observed at 192.672, corresponding with the weekly Pivot Point, PP, calculated using the standard methodology.
194.186: An additional upside target is projected at 194.186, mirroring the trough from January 2.

Should the sellers maintain market control, traders may consider the four potential support levels listed below:
187.640: The initial support level is estimated at 187.640, corresponding to the low point marked January 7.
183.703: The second support level is identified at 183.703, representing a trough from September 11.
181.045: A third support level is 181.045, mirroring the 423.6% Fibonacci Extension drawn from 194.186 to 198.247.
180.079: An additional downside target is seen at 180.079, reflecting a trough from last year.

The Bank of England (BoE) reduced interest rates by 25 basis points to 4.5%, aligning with expectations, while signaling caution about future cuts due to an anticipated inflation spike. Two members of the Monetary Policy Committee pushed for a larger cut to 4.25%. The BoE now expects inflation to peak at 3.7% in 2025—well above its 2% target—before gradually easing.
The central bank also slashed its 2025 growth forecast from 1.5% to 0.75%, reflecting weak business sentiment, sluggish productivity, and global trade risks. Despite the rate cut, the BoE emphasized a “careful” approach moving forward, citing global uncertainty and persistent inflationary pressures. Investors anticipate two to three additional rate cuts by the end of 2025, though the BoE’s messaging suggests a gradual path.
On the other hand, the Bank of Japan is shifting focus to chronic labour shortages as a key inflation driver, suggesting more rate hikes ahead. Policymakers see wage-driven inflation persisting despite weak growth, with markets now expecting rates to rise beyond 1.0%.
Persistent worker shortages and rising wages are fueling inflation, keeping pressure on the BoJ to tighten policy. This outlook has pushed bond yields higher and strengthened the yen, as investors brace for a longer rate hike cycle.

With key employment data from Canada and the U.S. on the horizon, traders should brace for potential volatility in CAD and USD pairs. GBPJPY remains under sustained bearish pressure, with technical indicators pointing to further downside unless market dynamics shift. On the macroeconomic front, diverging central bank policies—BoE’s cautious rate cuts versus BoJ’s tightening amid rising wage-driven inflation—are set to play a pivotal role in shaping currency movements in the coming weeks.