On Wednesday, the GBP/JPY pair posted gains for the third consecutive day, reaching a new weekly high of around 217.70. Moreover, current spot prices are within reach of the highest levels since January 2008 and seem poised for further upward movement, supported by a positive fundamental backdrop.

Despite potential risks of intervention, the Japanese yen continues to show relatively low yields due to the significant difference in interest rates between Japan and other major economies, including the UK. In June, the Bank of Japan raised its short-term interest rate to 1%, the highest level since 1995, while the Bank of England's base rate stands at 3.75%. This creates a 275-basis-point gap, which supports carry trades involving the Japanese yen and positively impacts GBP/JPY.

However, the Japanese economy is in a vulnerable position due to its dependence on energy imports, especially amid disruptions through the Strait of Hormuz, from which it receives over 90% of its crude oil. The closure of this important waterway, coupled with the ongoing escalation of conflict between the U.S. and Iran, also weighs on the Japanese yen.

At the same time, the British pound is receiving support from decreasing political instability in the UK, strong signals from the BoE, and a moderate weakening of the U.S. dollar. This creates a positive environment for the GBP/JPY pair, benefiting the bulls.

On Tuesday, during his speech before the House Financial Services Committee, BoE Governor Andrew Bailey highlighted the potential consequences of the renewed conflict between the U.S. and Iran, emphasizing that inflation has not yet decreased sufficiently. Traders quickly priced in at least one 25-basis-point interest rate hike by the end of the year, with the possibility of the first hike occurring as early as September. This indicates that the path of least resistance for the GBP/JPY pair is upward, and any corrections are likely to be seen as convenient opportunities for bulls to enter new purchases.

From a technical perspective, the pair has shown resilience below the 9-day EMA and is once again targeting the round level of 218.00. In the event of a decline, the next support may come from the 14-day EMA and the round level of 216.00. However, with oscillators in positive territory, this indicates that the bulls hold the advantage.