GBP/JPY jumps to two-week high, bulls have the upper hand above mid-163.00s

• GBP/JPY gained strong positive traction on Monday and rallied around 200 pips from the daily swing low.
• The BoJ cut its assessment for most regional economies, which weighed on the JPY and extended support.
• Subdued USD price action benefitted the British pound and remained supportive of the strong momentum.

The GBP/JPY cross added to its strong intraday gains and surged to a two-week high, above mid-163.00s during the first half of the European session.

Following the modest bearish gap opening, the GBP/JPY cross caught aggressive bids on the first day of a new week and has now rallied around 100 pips from the daily low near the 161.60 region. The Japanese yen weakened across the board after the Bank of Japan cut its assessment for most regional economies. Adding to this, the BoJ Governor Haruhiko Kuroda warned of very high uncertainty over the fallout from the Ukraine crisis.

On the other hand, the British pound drew some support from subdued US dollar price action, weighed down by a goodish pickup in demand for the shared currency. The combination of supporting factors helped offset disappointing UK macro data, showing that the economic growth decelerated to 0.1% in February from the 0.8% previous. Moreover, the UK Manufacturing and Industrial Production unexpectedly contracted during the reported month.

The strong intraday surge took along some short-term trading stops placed near the 162.35-162.40 zone - a resistance marked by the top end of a three-day-old consolidation range. Hence, the momentum could further be attributed to some technical buying. A subsequent move beyond the 163.00 mark might have already set the stage for additional gains amid caution around the BoJ's intervention to defend its 0.25% yield target.

Technical levels to watch