Today, on Tuesday, the GBP/JPY pair rate suffered a setback, breaking its week-long upward trend and reaching the 202.00 level amid a notable increase in demand for the Japanese yen. Japan's Economy Minister Minoru Kiuchi emphasized the importance of ensuring that the exchange rate reflects real economic fundamentals and remains stable, adding that he will closely monitor its impact on the national economy. These comments heightened expectations of possible government intervention to curb further yen weakness.

In addition, ahead of the Bank of Japan's (BoJ) policy meeting scheduled for this week, there has been a rebalancing of trading positions. This has prompted yen "bears" to reduce their short positions, becoming a key factor putting downward pressure on the GBP/JPY pair.

The BoJ's policy decision is expected on Thursday. The central bank is likely to maintain its current policy stance despite growing expectations of significant fiscal spending under Japan's new Prime Minister Sanae Takaichi. On Monday, data showed that inflation in Japan's services sector rose again in September — the second consecutive month of increases. Moreover, consumer inflation has exceeded the Bank of Japan's 2% target for more than three years. This strengthens the likelihood of a rate hike by the end of this year or early next year.

The BoJ's increasingly hawkish outlook contrasts sharply with expectations of further monetary easing from the Bank of England. Combined with concerns about the UK's fiscal outlook ahead of the Autumn Budget scheduled for November, this continues to pressure the British pound and increases the likelihood of further declines in the GBP/JPY cross. As a result, a gradual weakening of the pair below the key 202.00 level appears to be a plausible scenario.

From a technical standpoint, the likelihood of GBP/JPY falling below the 202.00 psychological level will become clear only if the Relative Strength Index (RSI) turns negative. At present, the 202.00 round level serves as strong support, while the nearest resistance zone is represented by the 14-day EMA around 202.60, on the way toward the 203.00 level.