- GBP/JPY receives fresh offers on Tuesday and approaches the 200-day SMA barrier.
- The positive risk tone and dovish outlook from the Bank of Japan weaken the yen and provide support.
- Expectations of more rate hikes from the BOE benefit the GBP and favor the bulls.
The crossing GBP/JPY is supported on the previous day’s solid rebound from the key psychological 160.00 level, or one-month low, and gains some traction on Tuesday. The momentum remains unbroken into the mid-European session and lifts the cross back closer to a technically significant 200-day SMA around the 163.40 area within the last hour.
The modest recovery in global risk sentiment, reflected in a generally positive tone in equity markets, weakens the safe-haven Japanese yen (JPY) and acts as a tailwind for GBP/JPY. The yen is also under pressure from speculation that the Bank of Japan (BOJ) will maintain its dovish stance to support the fragile domestic economy. It is worth mentioning that the new BoJ Governor, Kazuo Ueda, recently stressed the need to maintain ultra-loose policy, stating that the central bank does not intend to move quickly away from a decade of massive easing.
Sterling, meanwhile, is supported by rising expectations that the Bank of England will raise interest rates again later this month. Mixed UK jobs data, released early Tuesday, did little to offset bets on a further tightening of monetary policy by the BoE. Indeed, the UK Office for National Statistics reported that the unemployment rate held steady at 3.7% for the three months to January and the number of people claiming unemployment benefits fell for the second month running in February, offsetting a slight slowdown in wage growth figures.
However, the strong rebound in demand for US dollars is weighing on sterling and could dampen GBP/JPY gains, at least for now. However, the aforementioned fundamental undercurrent favors bullish traders and suggests that the path of least resistance for spot prices is to the upside. Therefore, any significant decline could continue to attract new buyers and is more likely to remain limited.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
