GBP/JPY defends 168.00 with eyes on UK politics, Japan intervention

• GBP/JPY struggles to fight bears as it retreats from intraday high.
• Yields refresh multi-year top amid inflation woes but Japan policymakers resist meddling.
• UK PM Truss lost another supporter while Tory whips survived vote on fracking.
• Risk catalysts are crucial amid a light calendar; sellers could keep the reins unless Tokyo intervenes.

GBP/JPY extends pullback from intraday high heading into Thursday’s London open, retreating to 168.00 after a two-day downtrend. In doing so, the cross-currency pair portrays the market’s indecision amid strong yields and political pessimism in the UK.

That said, US 10-year Treasury yields refreshed a 14-year high above 4.0%, around 4.14% by the press time, while its two-year counterpart stays strong near the highest level since 2007, up 0.30% intraday near 4.57% at the latest.

It’s worth noting that China’s debate on reducing quarantine time for international travelers seemed to have triggered the GBP/JPY pair’s latest uptick, before it dropped.

Even so, the quote remains on the bear's radar amid wide divergence between the monetary policies of the Bank of Japan (BOJ) and the Bank of England (BOE), as well as due to the looming intervention by the Japanese policymakers to defend the yen.

Talking about the UK’s political jitters, UK PM Liz Truss had to forgo Interior Minister Suella Braverman, over a "technical" breach of government rules, per Reuters, after losing Kwasi Kwarteng, the ex-Chancellor.

However, the Tory Chief Whip and Deputy survived Wednesday’s voting in the British Parliament. “The motion by the main opposition Labour Party was defeated by 326 votes to 230 and the government proposal won, but some lawmakers said they were angry over the tactics, or lack of them, used by the government,” said Reuters.

Elsewhere, broadly firmer inflation numbers from Britain, Eurozone and Canada, as well as the hawkish Fed bets and pessimism conveyed by the Fed’s Beige Book, seem to weigh on the market’s risk appetite and the GBP/JPY prices.

Looking forward, GBP/JPY traders should pay attention to Japan’s money market moves and yields amid impending meddling from Tokyo, which could propel the quote. However, the overall view remains bearish for the short term unless UK politics has anything major positive to cheer about.

Technical analysis

While failures to successfully cross the 170.00 psychological magnet lures GBP/JPY sellers, a convergence of the 10-DMA and monthly support line, around 165.20, appears crucial for buyers before relinquishing control.