GBP/JPY, rejected at 157.05, dives to levels sub-156.00

The British pound has lost its bullish momentum after failing to confirm above 157.00 during Friday’s London trading, and the pair has posted a significant pullback during the US session, reaching day-lows right above 156.00.

The sterling gives away gains on end-of-month trading

The GBP/JPY is depreciating about 0.3% on the day, and on track to close the week practically flat, with the pair losing in less than two hours all the ground taken on Thursday and early Friday. In absence of relevant macroeconomic releases, closing positions at month-end might be one of the main reasons behind the sudden pound reversal.

Earlier this week, the sterling was buoyed by the dovish monetary statement by the Bank of Japan, which maintained its ultra-expansive policy and downgraded the country’s growth prospects for 2021.

On the other hand, the upbeat economic outlook forecasted by the UK finance minister Rishi Sunak at the Autumn Budget Report boosted hopes of a strong post-pandemic recovery in the UK and reinforced market expectations of a BoE rate hike in early 2022.

GBP/JPY is testing support at 155.95

On a broader view, the pair is hovering right above the bottom of the last weeks’ horizontal range, with immediate support at 155.95 (Oct. 22, 28 lows) ahead of 155.70 (Oct. 27 lows) If these levels are breached next potential target might be 154.80 (October 12 high).

On the upside, the pair should break above 157.10 where the October 28 high meets the 50-period SMA in the 4hr chart. Above here, the pair would regain bullish traction to extend towards 157.75 (Oct. 26 high) and then 158.20 (Oct. 20, 21 highs).

Technical levels to watch