GBP/JPY consolidates recent gains to multi-month tops, around 142.00 mark

• GBP/JPY added to the overnight strong gains and scaled higher for the second straight session.
• The GBP remained supported after BoE Governor Bailey downplayed negate rate speculations.
• The underlying bullish sentiment undermined the safe-haven JPY and remained supportive.

The GBP/JPY cross seems to have entered a bullish consolidation phase and was seen oscillating in a range around the 142.00 mark, just below multi-month tops set earlier this Wednesday.

The cross gained strong positive traction for the second consecutive session and built on the previous day’s bullish breakout momentum beyond the 141.30-40 region. The strong intraday move up of around 130 pips on Tuesday came after the Bank of England Governor Andrew Bailey downplayed speculations on negative interest rates.

Bailey added that there are a lot of issues with negative interest rates and it was too soon to reach any conclusion about the need for future stimulus. Bailey’s comments indicated that the BoE is more likely to wait and see how the economy reacts to Brexit and the third lockdown in the UK before deciding on anything.

Meanwhile, the rollout of vaccines for the highly contagious coronavirus disease, to a larger extent, offset worries about the continuous surge in new cases. This, in turn, continued fueling hopes for a strong global economic recovery and remained supportive of the underlying bullish sentiment in the financial markets.

Apart from this, the likelihood of a more aggressive US fiscal spending further boosted investors confidence. This was seen as a key factor that undermined the safe-haven Japanese yen and provided an additional boost to the GBP/JPY cross. That said, slightly overbought conditions on intraday charts held bulls from placing fresh bets.

Nevertheless, the near-term bias remains tilted in favour of bullish traders and the momentum is more likely to get extended towards September 2020 swing highs, around the 142.70 region. Some follow-through buying will set the stage for an extension of the GBP/JPY pair’s ongoing upward trajectory.

Technical levels to watch