3 October 2025,05:57
Daily Market Analysis
3 October 2025, 05:57
*Governor Ueda’s cautious remarks reduced odds of an October BoJ hike, curbing earlier safe-haven driven yen gains.
*LDP leadership race signals expansionary fiscal plans, raising concerns over Japan’s fiscal path and BoJ’s accommodative stance.
*With policy normalization expectations tempered and fiscal support likely, the yen faces extended underperformance against peers.
Market Summary:
The Japanese yen relinquished its early-week gains, reversing course as safe-haven flows subsided and market expectations for near-term Bank of Japan tightening were tempered. The shift in sentiment was triggered by BoJ Governor Kazuo Ueda’s speech during the Tokyo session, where he maintained a notably cautious stance ahead of the central bank’s October policy meeting.
Ueda emphasized a strictly data-dependent approach, stating the BoJ would “adjust monetary easing as needed” only if its baseline economic scenario materializes. The remarks disappointed market participants who had been positioning for more explicit hawkish signals, effectively reducing the perceived likelihood of an October rate hike.
Compounding the yen’s weakness, political uncertainty is rising as Japan’s ruling Liberal Democratic Party prepares to select its new leader this weekend—a position that typically leads to the premiership. The current frontrunners have advocated expansionary fiscal policies including cash payouts, tax cuts, and childcare support, raising concerns about Japan’s fiscal trajectory and potential pressure on the BoJ to maintain accommodative monetary policy to support government financing.
The combination of diminished rate hike expectations and potential fiscal expansion has created a fundamentally bearish environment for the yen in the near term. Traders are now reassessing the currency’s outlook, with the BoJ likely to maintain policy stability through the leadership transition, potentially extending the yen’s underperformance against major counterparts.
Technical Analysis
The GBP/JPY pair has confirmed a breakdown of its previous bullish structure, falling below the critical support level at 199.30 and declining approximately 0.75% before finding temporary support near 197.60. While the subsequent technical rebound indicates some near-term stabilization, the breach of the 199.30 level represents a significant deterioration in the pair’s technical outlook.
The pair now faces a substantial resistance zone between 199.00 and 199.30—the former support area that is now expected to act as a barrier to further recovery. A rejection at this level would reinforce the bearish bias and likely trigger a resumption of the downward move, potentially targeting the next support level near 196.50.
Momentum indicators reflect this transitional phase. The Relative Strength Index has rebounded from oversold territory, suggesting the initial selling pressure has eased, while the Moving Average Convergence Divergence shows signs of potential stabilization, though it remains below its zero line. This configuration suggests that while the immediate downward momentum has moderated, the overall technical structure remains bearish.
Resistance Levels: 199.55, 201.00
Support Levels: 197.60, 196.00
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