The Japanese Yen (JPY) continued its decline against major currencies on Tuesday, with the GBP/JPY pair trading at 216.00 and extending gains for the third consecutive day, despite mixed UK employment figures. The pair remains just below the key resistance area at 216.35, with bulls eyeing the July 31 high of 216.36. Technical indicators suggest the rally may be overstretched, as the Relative Strength Index (RSI) nears overbought territory and the MACD indicator flattens around the zero line, hinting at waning momentum. A breach of 216.35 could expose further resistance between 217.16 and 217.53, while support lies at 215.41 and lower at 214.53 and 213.23 [1].
Japanese GDP figures released on Monday showed economic growth slowing to 0.3% in Q2, down from 0.5% in the previous quarter, casting doubt on the Bank of Japan’s ability to accelerate its monetary tightening cycle. This soft data has undermined support for the Yen, which remains on the back foot. The USD/JPY pair appreciated for the second consecutive day, reaching the 159.75 area and approaching the 160.00 level, considered a critical threshold for Tokyo authorities. Analysts at UOB Group note that the US Dollar's underlying tone remains firm, with price action likely to stay within a narrower range of 158.00/160.20 in the near term [2].
Market sentiment has soured due to renewed tensions in the Middle East, following the expiration of the US-Iran Memorandum of Understanding on Monday. US President Donald Trump threatened to bomb Oman if it interferes with negotiations with Iran, while Iranian authorities announced a shift to a "fully offensive" military stance. Additionally, the UK Maritime Trade Operations reported a vessel struck by an unknown projectile in the Strait of Hormuz. These developments have contributed to a risk-off mood, supporting the US Dollar and weighing on risk-sensitive currencies like the Yen [2][3].
Currency heat maps from both sources show the Yen weakening against the US Dollar (-0.07% [1], -0.19% [3]) and the Pound (-0.04% [1], -0.04% [3]), while the US Dollar was the strongest against the New Zealand Dollar. The GBP/JPY pair has rallied more than 3% from August 2 lows, maintaining a bullish near-term bias [1].
Looking ahead, analysts expect the US Dollar to remain firm, but anticipate price movements to be contained within a defined range. No explicit forward-looking statements regarding the Yen or GBP/JPY were provided beyond technical analysis and UOB's commentary [1][2].
CONCLUSION
The Japanese Yen is under pressure due to disappointing GDP data and heightened geopolitical risks, with GBP/JPY approaching key resistance levels. Market sentiment remains cautious, favoring the US Dollar and risk-off assets. Analysts expect limited near-term volatility for USD/JPY, while GBP/JPY's bullish momentum may be tested by technical resistance.