Pound Pressure: GBP/JPY Struggles Amid Rising Gilt Yields

The GBP/JPY lost its shine as the Pound sterling declined further. It hit an intraday low of 191.97 and currently trading around 192.01. Potential Reversal Zone (PRZ) is set at 200.20.

Soaring Gilt Yields Impact the Pound

UK gilts yield to their highest levels since the 2008 financial crisis: Britain's currency has come under pressure as gilt yields have hit the highest in history. This fiscal instability may raise a red flag to Chancellor Reeves in the UK as it hits the yield for 10-year gilts at 4.93%, while 30-year yields now sit at 5.44%, forcing him to cut down spending or raising taxes in the much-awaited Autumn Budget. Consequently, the pound has weakened more than 1% against the U.S. dollar, hitting about $1.2342, its lowest level in more than a year. Analysts draw parallels with previous market crises, but they consider that the situation now is not as bad as it was in 2022. This could have implications for future monetary policy by the Bank of England. In general, soaring gilt yields and potential fiscal tightening lead to a negative outlook for the pound.

Technical Analysis of GBP/JPY

The GBP/JPY pair is trading below 34 and 55 EMA (Short-term) and 200 EMA (long-term) on the 4-hour chart, confirming an overall downtrend. Immediate resistance is at 195; a breach above this level could lead to targets of 195.60/196.25/197. Downside support is at 193.45 with additional levels at 192.50/191.66/190.

Market Indicators

CCI (50)- Bearish

Directional movement index - Bearish

 It is recommended to sell on rallies around 193 with a stop-loss at 194 for a TP of 190.10.