GBP/JPY remains offered below 184.00 amid intervention fears; focus shifts to BoE on Thursday

• GBP/JPY struggles to capitalize on the previous day’s post-BoJ rally to a seven-week high.
• Intervention fears prompt some profit-taking ahead of the BoE policy meeting on Thursday.
• The BoJ’s dovish stance might continue to undermine the JPY and help limit the downside.

The GBP/JPY cross comes under some selling pressure on Wednesday and erodes a part of the previous day's strong gains to the 184.30 area, or its highest level since September 13. Spot prices, however, manage to recover a few pips from the daily low and currently trade around the 183.80 region, down less than 0.30% for the day.

Traders opted to lighten their bearish bets around the Japanese Yen (JPY) in the wake of verbal intervention by authorities, which, in turn, is seen as a key factor weighing on the GBP/JPY cross. Japan's top currency diplomat Masato Kanda said that the government was ready to respond to "one-sided, sharp" moves in currency markets. Adding to this, Japanese Chief Cabinet Secretary Hirokazu Matsuno noted that they won't rule out any steps to respond to rapid, disorderly and undesirable FX moves.

That said, the Bank of Japan's (BoJ) dovish pledge to continue with its extremely accommodative policy to support the domestic economy caps gains for the JPY and helps limit the downside for the GBP/JPY cross. The Japanese central bank announced minor changes to its yield curve control (YCC) policy on Tuesday, disappointing investors hoping for a more aggressive move towards ending years of monetary stimulus. The BoJ also indicated that a shift away from the ultra-dovish stance will take longer than initially expected.

The British Pound (GBP), on the other hand, is undermined by a modest US Dollar (USD) strength and speculations that the Bank of England (BoE) will leave the benchmark interest rate on hold for the second successive time to support the ailing economy. This fails to assist the GBP/JPY cross to capitalize on its modest intraday bounce from the vicinity of mid-183.00s. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the BoE monetary policy decision, scheduled to be announced on Thursday.

Technical levels to watch