The pound (GBP) to yen (JPY) currency pair nicknamed the “Geppy” is one of the most widely traded cross-currency pairs. The term cross-currency pair refers to the fact that the currencies are traded directly and not exchanged indirectly through US dollars. In the GBP/JPY pair the pound is considered the base currency and the yen the quote currency. This means that at the current quote of 132.75 it takes 132.75 JPY to buy one GBP.
GBP/JPY latest forex news
The Japanese yen is seen as an indicator of the Japanese and overall East-Asian economy. While the intensity of US and Chinese trade rhetoric intensifies amid the coronavirus pandemic the yen could prove sensitive to continued tensions. Still, the yen is considered relatively safe in comparison to other Asian currencies.
Japan has also taken a less disruptive approach to managing the pandemic and this has allowed for the economy to be less negatively affected compared to other Asian countries. This has led to yen being one of the strongest performing currencies thus far in 2020.
Trade British Pound / Japanese Yen CFD
Meanwhile the continued uncertainty surrounding when a global economic recovery will take shape and what that recovery will look like has traders seeking refuge in the strongest traditional “safe haven” currencies such as the US dollar and Swiss Franc.
This has led to an erosion of the GBP value relative to USD in 2020 and a decline in the value compared to the yen. There is also a very real concern that any positive steps that the UK takes towards reopening will result in setbacks and a longer road to recovery.
Increasing scrutiny of the US government's strategy of buying higher risk debt and concerns of a prolonged and painful recovery from the pandemic should also increase the upward pressure on the yen as traders seek an alternative safe and liquid currency in response to US dollar risk.
GBP/JPY price analysis
The yen is the third most widely traded global currency while the pound is the fourth, though they are mostly traded in US dollars. Forex GBP/JPY strategy requires the trader to consider multiple underlying factors such as risk sentiment and trade relations. The yen is a highly liquid and relatively stable currency.
Due to the pair’s notorious volatility, GBP/JPY strategy requires setting wide stop loss margins as large swings are expected frequently. When considering how to trade GBP/JPY it is best to take a cautious approach in the beginning until you become accustomed to some of the daily volatility that you will encounter.
As of writing this article the GBP/JPY resistance level of 133 is being challenged. Bearish market sentiment set a forward target of ~130 and at levels below 133 this target should remain.
While Japan announced that it is considering speeding up its relaxation of social restrictions due to Covid-19 in the areas of the country least affected, the UK has announced that these restrictions will need to remain in place.
Any major positive changes in the UK could push the pair past the resistance point of 133 and allow the bulls to push the British pound higher compared to the Japanese yen towards the next resistance point of 134.
It should be noted that Boris Johnson announced a plan to reopen the economy recently and investors reacted to seemingly positive news from the UK with scepticism about how realistic the news is. A short rally to the pound was quickly erased. It should be expected that the yen continues to strengthen relative to the pound in the near term without any major unforeseen positive developments to the virus situation in the UK.
GBP/JPY trading strategy and price forecast
Recent gains in the stock market fuelled by optimism over major economies reopening successfully have pulled back recently as the reality of potential “second wave” disruptions become more evident.
The effect on how to trade GBP/JPY is that there is likely to be continued strength of the yen while the pound may continue to slide. The longer-term impacts of the pandemic are the most relevant aspect to any investment discussion but even as recovery begins to materialise the UK still has ongoing Brexit negotiations and dismal oil prices to contend with. This will continue to put downward pressure on the pound even as the economy begins to reopen.
While economic optimism tends to steer money towards higher-risk currencies such as the pound, the recent pull back should push more money towards relatively safe currencies such as the yen. True to its history of volatility, positive economic news regarding the coronavirus pandemic, Brexit or oil prices will push the GBP higher in terms of JPY. It is likely to see gains for the pound come in short and non-sustained bursts that are quickly eroded in the short to medium term.
A GBP/JPY scalping strategy is recommended for experienced traders as a way to profit from these sudden changes in price and is currently the best GBP/JPY strategy. Based on the current outlook, Japan is further ahead in its recovery than the UK and should continue to benefit from the prevalent risk-averse sentiment. Overall investors seem bearish on GBP/JPY trading strategy, indicating that the pair is a sell in current conditions.
Still, with contracts for difference, it does not matter whether your view of the GBP/JPY forecast 2020 is positive or negative. You can always try to profit from any future price fluctuations, regardless of their direction, by taking a long or a short position respectively. Follow the latest Forex news and track the GBP/JPY live rates at Capital.com.