GBP/JPY hangs near multi-week lows, around mid-135.00s post-BoJ and ahead of BoE

• GBP/JPY came under some fresh selling pressure amid a pickup in demand for the JPY.
• The prevalent risk-off mood and BoJ’s upbeat economic assessment benefitted the JPY.
• The GBP traders wait on the sidelines ahead of the latest BoE monetary policy decision.

The bid tone surrounding the Japanese yen (JPY) pushed the GBP/JPY cross back closer to the lower end of a one-week-old trading range, around mid-135.00s.

A sharp turnaround in the global risk sentiment – as depicted by a fresh leg down in the equity markets – boosted the JPY’s safe-haven status. Adding to this, the Bank of Japan’s less gloomy view on the domestic economy provided an additional boost to the JPY and prompted some fresh selling around the GBP/JPY cross.

The JPY bulls largely shrugged off dovish comments by the BoJ Governor Haruhiko Kuroda, saying that the central bank would not hesitate to add monetary easing. In the post-meeting press conference, Kuroda further indicated the possibility for rates to go lower than current levels, albeit failed to lend any support to the GBP/JPY cross.

On the other hand, the British pound struggled to gain any meaningful traction despite some positive Brexit development. According to reports, Britain offered tentative concessions on fisheries in trade talks with the European Union last week. Investors, however, preferred to wait on the sidelines ahead of the BoE monetary policy update.

The UK central bank is not expected to change its policy settings but show readiness to add more stimulus to support the economy from a possible Brexit shock. Hence, the key focus will be on the accompanying statement, which, along with the incoming Brexit-related headlines, will influence the near-term GBP price dynamics.

Looking at the technical picture, the recent range-bound price action warrants some caution for aggressive traders and placing any aggressive directional bets. That said, the GBP/JPY pair’s inability to register any meaningful recovery from seven-week lows suggests that the recent bearish pressure might still be far from being over.

Technical levels to watch