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  • GBP/JPY caught some fresh bids ahead of the key 135.00 psychological mark post-BoE.
  • The upbeat market mood undermined the safe-haven JPY and remained supportive.
  • Persistent Brexit-uncertainties might keep a lid on any meaningful upside for the cross.

The strong intraday buying around the British pound pushed the GBP/JPY cross to fresh session tops, around the 136.30 region in the last hour, albeit quickly retreated few pips thereafter.

The cross managed to attract some dip-buying ahead of the key 135.00 psychological mark and stalled its sharp retracement slide from two-week tops set in the previous day. The uptick was exclusively sponsored by the emergence of some fresh buying around the British pound.

In the absence of any negative Brexit-related headlines, the sterling witnessed some short-covering move after the Bank of England (BoE) refrained from setting negative interest rates. The BoE also announced to expand its Asset Purchase Facility by £150 billion to £895 billion.

The BoE also showed readiness to ramp up the stimulus again to combat the economic fallout from the second nationwide lockdown in the UK, aimed to curb the second wave of COVID-19. Separately, the UK finance minister Sunak announced an extension of furlough scheme to the end of March.

Apart from this, the prevalent upbeat market mood – as depicted by strong gains in the equity markets – undermined the safe-haven Japanese yen against its British counterpart. This, in turn, provided an additional boost to the GBP/JPY cross and remained supportive of the move up.

That said, the heavily offered tone surrounding the USD/JPY pair might hold investors from placing any aggressive bullish bets and keep a lid on any strong gains for the GBP/JPY cross. Hence, it remains to be seen if the cross is able to capitalize on the move or runs into some fresh supply.

On the Brexit front, British and EU negotiators are yet to find a compromise on the most persistent sticking points – the so-called level-playing field, fisheries and state-aid. This might turn out to be another factor capping the upside for the GBP/JPY cross, at least for the time being.

Technical levels to watch