GBP/JPY holds steady near session tops, bulls await a sustained move beyond 152.00 mark

The GBP/JPY cross reversed the post-BoE knee-jerk fall to the 151.25 area and refreshed session tops in the last hour. The uptick, however, lacked any strong follow-through, with bulls still struggling to find acceptance above the 152.00 mark.

The cross witnessed some selling after the Bank of England announced its decision to leave monetary policy settings unchanged at the conclusion of the May meeting this Thursday. The decision was widely anticipated by the market, though the lack of clarity on future tapering plans exerted some downward pressure on the British pound.

The intraday downtick, however, turned out to be short-lived and was quickly bought into after the accompanying statement revealed that the BoE could slow the pace of UK government bond purchases. This suggests that policymakers might start talking up the taper process in the months ahead, which, in turn, underpinned the sterling.

Apart from this, the more hawkish forecasts accompanying the statement provided an additional lift to the GBP/JPY cross and remained supportive of the swift intraday rally of nearly 90 pips. The UK central bank now anticipates GDP growth of 7.25% in 2021 and 5.75% in 2022. Adding to this, inflation is now seen averaging 2.5% through 2021.

Meanwhile, the supporting factor, to some extent, was offset by a generally cautious mood around the European equity markets. This was seen as a key factor that extended some support to the safe-haven Japanese yen and kept a lid on any strong follow-through gains for the GBP/JPY cross, warranting some caution for aggressive bullish traders.

Moreover, investors also preferred to wait on the sidelines amid the uncertainty over the outcome of the Scottish parliament election. Final opinion polls suggest a supermajority for pro-independence parties in Scotland, which might intensify pressure on the UK Prime Minister Boris Johnson to allow a second independence referendum.

Hence, it will be prudent to wait for a sustained move beyond the recent swing highs, around the 152.40 region before traders start positioning for any further near-term appreciating move. Conversely, a convincing break below the 151.00 mark will mark a bearish breakdown through a one-and-hald-week-old trading range.

Technical levels to watch