- GBP/JPY regained positive traction on Wednesday and inched back closer to the overnight swing high.
- A generally positive risk tone undermined the safe-haven JPY and remained supportive of the move.
- A modest USD strength acted as a headwind for the GBP and capped any further gains for the cross.
The GBP/JPY cross maintained its bid tone through the mid-European session, albeit has retreated few pips from daily tops. The cross was last seen trading around the 150.70-75 region, up nearly 0.20% for the day.
Despite the previous day’s sharp pullback from multi-day tops, the GBP/JPY cross managed to defend the key 150.00 psychological mark and regained positive traction on Wednesday. The uptick was exclusively sponsored by the emergence of some fresh selling around the safe-haven Japanese yen, though a subdued price action around the sterling capped any further gains.
Concerns about the fast-spreading Delta variant eased after China said that it had stopped the community spread of COVID-19. Adding to this, the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine. The development raised hopes that inoculations in the US could accelerate and restored investors’ confidence.
This was evident from a generally positive tone around the equity markets, which undermined demand for traditional safe-haven currencies, including the JPY and extended some support to the GBP/JPY cross. Bulls, however, struggled to capitalize on the move and the upside remained capped below the overnight swing highs, around the 151.00 round-figure mark.
A modest US dollar strength acted as a headwind for the British pound and failed to provide any additional boost to the GBP/JPY cross. This makes it prudent to wait for some strong follow-through buying before traders start positioning for an extension of the recent bounce from the vicinity of the 149.00 mark, or one-month lows touched last Friday.
Technical levels to watch