The British Pound Japanese Yen (GBPJPY) is a popular currency pair among forex traders. As we head into 2024, what is the technical and fundamental outlook for GBPJPY? This comprehensive guide provides an in-depth forecast of where the pair may be headed based on historical price action, economic developments, and expert projections.
GBPJPY experienced high volatility in 2022 due to diverging monetary policies and shifts in risk sentiment. As the Bank of England raised interest rates to combat inflation while the Bank of Japan maintained loose policy, GBP strengthened against JPY. However, recession fears, political uncertainty, and yen safe-haven flows also impacted price action.
Heading into 2024, analysts expect continued volatility as central banks navigate inflation-growth dynamics. However, the long-term downtrend in GBPJPY since 2015 may be reversing as policy normalization proceeds. Traders will closely watch technical levels along with macroeconomic data and geopolitics.
This guide offers an extensive GBPJPY forecast for 2024 using technical and fundamental analysis. Key topics covered include:
- Review of GBPJPY price action and trends since 2020
- Technical analysis of chart patterns, support/resistance, indicators
- Fundamental drivers: BOE and BOJ policy, growth, inflation
- Expert projections for GBPJPY in 2024
- Trading strategies and risk management
Let’s dive in and uncover the essential factors that may drive GBPJPY over the next year.
GBPJPY Overview: Price Action and Trends
First, a quick overview of GBPJPY’s historical price action and trends provides context on current levels.
Price Action Since 2020
GBPJPY traded in a range between 130 and 148 through most of 2020 during the initial COVID crisis until breaking higher to 154 as vaccine optimism boosted risk appetite.
In 2021, the pair climbed to 167, reversing the long-term downtrend as the UK economic reopening gained pace. However, GBPJPY then collapsed back to 150 as the Omicron variant hit.
2022 saw increased volatility as the war in Ukraine caused jumpy yen price action. GBP also weakened on recession worries before rebounding on hawkish BOE policy. GBPJPY hit 162 in mid-2022 before retreating again to settle around 164 by year-end.
Long-Term Technical Trends
From a long-term lens, GBPJPY trended lower within a falling channel from the 2015 peak at 195 down to pandemic lows around 130. This multi-year downtrend reflected broad based JPY strength.
However, the breakout to 162 in 2022 may signal a long-term trend change if GBPJPY can establish support above 150. The pair is testing resistance around the 162/163 zone from the 1998 and 2015 highs.
Technical Analysis for GBPJPY in 2024
With the long-term backdrop in mind, let’s dive into key technical levels for GBPJPY in 2024 using chart pattern analysis, support/resistance, and indicators.
Chart Patterns and Support/Resistance
GBPJPY is approaching the 162/163 zone which marks the 1998 and 2015 highs, making this a crucial resistance level. If GBPJPY breaks decisively above 163, it opens the door for a move above the 170 psychological level.
On the downside, former resistance near 152-155 should provide support. Below that, the 2022 lows around 148-150 are critical to hold to maintain the uptrend. If GBPJPY breaks below 150, the long-term downtrend may resume targeting the 130s.
GBPJPY recently broke out of a symmetrical triangle consolidation pattern dating back to mid-2021, signaling a resumption of the uptrend. The measured move target based on the triangle is around 170.
Indicators and Oscillators
The RSI indicator on GBPJPY shows an ascending triangle, reflecting bullish momentum building. The MACD indicator is also trending higher above the zero line in bullish territory.
The 2022 high near 163 aligns with the 61.8% Fibonacci retracement level of the 2015-2020 downtrend, making this a key trigger point for further upside. The Ichimoku cloud has also flipped to bullish alignment.
Fundamental Analysis: Drivers for GBPJPY in 2024
Shifting gears to fundamentals, the BOE-BOJ policy divergence along with economic developments in the UK and Japan will drive GBPJPY in 2024.
BOE Rate Hikes vs BOJ Yield Curve Control
The critical factor is the widening gap between BOE and BOJ monetary policy. The BOE is aggressively raising rates to fight inflation while the dovish BOJ defends yield curve control. This policy divergence is bullish for GBPJPY.
The BOE is projected to hike rates further to around 4% by mid-2024 if inflation persists above 5%. Meanwhile, the BOJ will likely keep 10-year JGB yields capped near 0% due to Japan’s weak inflation and growth outlook.
As long as this policy divergence continues, GBPJPY could target 170 and beyond. Any cuts or pause in BOE tightening would be bearish.
UK and Japan Growth-Inflation Dynamics
UK inflation surged to 11% in 2022 before projected to moderate toward the 2% target in 2024 as energy pressures ease. The BOE expects the UK will enter a shallow recession in 2023 followed by a pickup in growth by late 2023.
In Japan, inflation only reached around 3% and may already be peaking as the yen stabilizes and energy costs level off. However, Japan’s economy will also see near-zero growth in 2023 on global slowdown.
If the UK avoids a deep recession while Japan’s economy stagnates, GBPJPY upside could persist. But a worse UK downturn would warrant caution.
Geopolitics can trigger safe-haven JPY flows, causing temporary setbacks in GBPJPY. Watch for developments around the war in Ukraine, China-Taiwan tensions, and other global flashpoints that could spur yen demand.
Any renewed USD strength or stock market corrections could also weigh on GBPJPY, though the Fed is likely nearing the end of its tightening cycle.
GBPJPY Price Targets from Analysts
Bringing in expert projections, here are some sample GBPJPY forecasts from banks and analysts for 2024:
- Morgan Stanley: GBPJPY to reach 170 by mid-2024 on policy divergence
- UOB: Sees range of 153-166 in 2023 on global slowdown risks
- Credit Suisse: Targets 162-165 in 2023 on UK recession outlook
- ANZ: Expects GBPJPY above 170 by 2024-end on BOE hikes
- Nomura: Projects range of 153-167 in 2023; scope for overshoot above 170
- TD Securities: Sees gradual climb to 165 in 2023 and 175 by 2024
- CIBC: Targets 175 by end-2024 as 2023 recession fears subside
The average GBPJPY forecast is for modest gains toward 165-170 but significant upside potential above 170 if global growth stabilizes and BOE policy stays aggressive.
Trading Strategies and Risk Management
Based on the fundamental and technical outlook, here are some potential trading strategies for GBPJPY in 2024:
- Buy dips to target range resistance – Look to buy pullbacks to 152/155 zone with targets at 163, 167, and 170. Use a stop below 150.
- Range breakout – Above 163, target move to 170/175. Below 150, retest 130s possible.
- Momentum/swing trades – Ride bullish crossovers on RSI/MACD up to resistance. Take partial profits at 163/167.
- Macro hedges – Long JPY crosses like GBPJPY can hedge risk-off events driving yen flows.
- Option strategies – Buy call spreads or sell put spreads on dips to benefit from upside.
Always use sound risk management with stop losses on positions and appropriate position sizing. The BOE-BOJ policy divergence favors upside, but global recession risks could spark volatility.
GBPJPY Outlook 2024: Conclusion
In summary, the multi-year downtrend for GBPJPY shows signs of reversing as the BOE tightens policy while the dovish BOJ defends yield curve control. This divergence is bullish, targeting a move above 170 if the UK avoids a severe recession.
However, traders should watch key levels at 150, 155, 163, and 170 along with economic data and geopolitical events. Volatility is likely to persist in 2024.patience and nimble trading will be required.
The GBPJPY pair presents an attractive opportunity in 2024 for traders able to navigate the risks. With prudent strategy and analysis, GBPJPY may offer upside potential as the long-term bear trend recovers.
Frequently Asked Questions
What was the highest level for GBPJPY in 2022?
The highest level GBPJPY reached in 2022 was around 163 in May before pulling back. This is near the key 162/163 resistance zone stemming from the 1998 and 2015 highs.
Will the Bank of England continue raising interest rates?
The BOE is expected to raise its key rate further to around 4% by mid-2024 if UK inflation persists significantly above its 2% target. However, risks of a UK recession may limit the pace of hikes.
What would cause the Bank of Japan to abandon yield curve control?
The BOJ is unlikely to abandon yield curve control in 2023/2024 unless Japan sees inflation sustainably above its 2% target. Japan’s weak inflation and growth outlook supports prolonged easy policy.
Could geopolitical tensions drive GBPJPY lower?
Yes, escalations in the war in Ukraine, China-Taiwan tensions, or other global flashpoints could spur safe-haven JPY buying, causing temporary dips in GBPJPY. Traders should monitor geopolitical risks.
Should option strategies be used to trade GBPJPY in 2024?
Yes, option spreads can hedge downside risks. For example, buying call spreads or selling put spreads can benefit from GBPJPY upside while limiting losses from potential setbacks.
Technical Analysis: Ichimoku Cloud, Fibonacci Levels
Looking deeper into the technical picture, Ichimoku cloud analysis and Fibonacci retracements provide further insight on potential GBPJPY direction.
The Ichimoku cloud flipped to bullish alignment in early 2022 when GBPJPY broke firmly above the Kumo (cloud). This suggests the uptrend will overpower any near-term pullbacks as long as GBPJPY holds above 148 support.
The Kijun line (blue) is trending higher above the Tenkan line (red), reflecting bullish momentum. The lagging span is also beginning to rise above the cloud in a bullish signal. As long as 148-150 holds, Ichimoku indicates scope for the uptrend to extend.
The recent break above the 61.8% Fibonacci retracement of the 2015-2020 downtrend aligns with the 2022 high around 163. This adds to its technical importance.
The next Fibonacci level sits at the 161.8% extension around 173. A decisive break above 163 would open the door for a test of 173.
On the downside, the 50% retracement near 156 and 38.2% retracement around 151 are near-term support to watch. As long as GBPJPY holds the 50-61.8% Fib zone between 151-163, the uptrend appears intact.
Conclusion: Patience Required but Upside Potential
In conclusion, the stars are aligning for a bullish GBPJPY outlook in 2024, but patience and discipline will be required. Traders should utilize multiple technical tools like Ichimoku, Fibonacci, and oscillators to identify high-probability setups.
Periodic volatility stemming from central bank policy shifts or political risks may generate sharp pullbacks. Yet the fundamental policy divergence supports upside potential above 170. With prudent strategies, GBPJPY looks poised to climb higher for traders able to capture opportune entries.
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