The GBP/JPY currency pair is experiencing renewed selling pressure on Wednesday, retreating toward the 198.00 level after another unsuccessful attempt to break above the critical 200.00 psychological threshold.
Despite stronger-than-expected UK inflation and retail sales data, bullish momentum has faltered, prompting a technical pullback in the pair as traders reassess near-term direction. Fletrade sheds light on this subject in an article filled with practical insights and expert analysis.
UK Economic Data Surprises to the Upside
The latest macroeconomic releases from the United Kingdom have surprised to the upside, further clouding expectations for monetary policy adjustments by the Bank of England (BoE).
According to the Office for National Statistics, the UK Consumer Price Index (CPI) rose to 3.6% year-on-year in June, up from 3.4% in the prior month. This marks a notable deviation from consensus forecasts, which had anticipated a more modest rise.
Meanwhile, Core CPI, which excludes volatile food and energy prices, increased to 3.7%, further reinforcing the view that underlying inflationary pressures remain elevated. In addition, the Retail Price Index (RPI) climbed to 4.4%, suggesting continued resilience in consumer spending, a component closely watched by policymakers for its implications on aggregate demand and price stability.
These data points contribute to the growing belief that the BoE will maintain interest rates at restrictive levels in the near term. Market participants had previously priced in a potential rate cut later in 2025, but persistent inflation complicates the central bank’s decision-making process.
Technical Outlook: GBP/JPY Holds Firm in Rising Channel
From a technical perspective, GBP/JPY remains structurally bullish, as price continues to respect the confines of an ascending channel that has defined recent market behavior. The pair is currently hovering around 198.00, registering a daily decline of approximately 0.60%, after bulls once again failed to engineer a sustained breakout above the 200.00 barrier, a level that has acted as a strong psychological resistance and the upper boundary of the ongoing price channel.
The immediate resistance zone lies between 199.83 and 200.00, an area that has been tested multiple times in recent weeks but has yet to be breached convincingly. This area remains a crucial pivot point for confirming a continuation of the broader uptrend.
Below current levels, initial support is seen at the June swing high of 198.11, closely followed by the 20-day Simple Moving Average (SMA) at 197.94. A decisive break below this zone would suggest short-term weakness and could expose the May high of 196.38, which also coincides with a previous channel resistance turned support.
A further downside move could trigger a retest of the 50-day SMA at 195.90, with the lower boundary of the ascending channel located near 195.36 emerging as a more robust support area. If this level is breached, the pair could enter a corrective phase, potentially invalidating the short-term bullish structure.
Momentum Indicators Point to Neutral Bias
Momentum indicators remain broadly supportive of the prevailing trend, but do signal a lack of strong directional conviction.
The Relative Strength Index (RSI) is currently hovering near 56, which is within neutral-to-mildly bullish territory, leaving room for further upside should buying interest return. However, without a confirmed breakout above 200.00, the pair risks slipping into a consolidation phase or triggering a technical correction.
Outlook: Consolidation Likely Unless 200.00 Breaks
While the GBP/JPY pair remains anchored within a bullish channel, the repeated inability to sustain gains above 199.83–200.00 raises concerns about upside exhaustion. As long as prices hold above the 197.90–198.00 zone, the uptrend remains technically valid, supported by rising moving averages and relatively steady momentum.
However, a daily close above the 200.00 mark is needed to reignite bullish conviction and potentially open the door toward higher resistance levels near 202.50 or even 205.00 in the medium term. On the flip side, a sustained breakdown below 197.90 would tilt the risk to the downside and signal the beginning of a deeper retracement, possibly toward 195.90 or lower.
Conclusion
In summary, GBP/JPY’s retreat following strong UK economic data reflects a classic case of buy the rumor, sell the fact, as traders lock in gains near a formidable resistance level. Despite the upbeat inflation and retail sales data, technical resistance around the 200.00 handle continues to cap bullish efforts.
With the pair confined within a rising channel, a clear directional bias will depend on a decisive breakout above or below current levels. Until then, short-term price action is likely to remain range-bound, with key support at 197.90 and resistance at 200.00 providing the immediate technical framework for market participants.
