GBP/JPY lacks any firm intraday direction, remains confined in a range below 186.00 mark

• GBP/JPY oscillates in a range on Wednesday and is influenced by a combination of diverging forces.
• Speculations that the BoJ will soon end its negative rates policy lend support to the JPY and cap gains.
• The overnight hawkish remarks by BoE’s Bailey continue to underpin the GBP and limit the downside.

The GBP/JPY cross struggles to capitalize on the previous day's solid recovery of over 150 pips from the 184.45 area, or a two-and-half-week low and oscillates in a narrow trading band during the Asian session on Wednesday. Spot prices remain below the 186.00 round-figure mark, warranting some caution before confirming that the recent sharp pullback from the highest level since November 2015 touched last week.

The Japanese Yen (JPY) continues with its relative outperformance in the wake of firming expectations that the Bank of Japan (BoJ) will end its negative interest rate policy in early 2024. With inflation overshooting the 2% target for the 18th straight month in September, BoJ Governor Kazuo Ueda said last week that the central bank won't necessarily wait until real wages turn positive before exiting the decade-long accommodative policy settings. This, in turn, is seen as a key factor acting as a headwind for the GBP/JPY cross.

The downside, however, remains cushioned in the wake of the Bank of England (BoE) Governor Andrew Bailey's hawkish remarks on Tuesday. Speaking at a Treasury Select Committee hearing, Bailey said that inflation will end the year a bit lower than expected, but risks were still on the upside. Bailey added that the central bank would not rule out the possibility of further interest rate hikes in the future. This, in turn, is seen acting as a tailwind for the British Pound (GBP) and lending some support to the GBP/JPY cross.

Apart from this, a stable performance around the equity markets could undermine the safe-haven JPY and contribute to limiting any meaningful slide. In the absence of any relevant market-moving economic releases from the UK, the aforementioned mixed fundamental backdrop warrants some caution before placing aggressive directional bets around the GBP/JPY cross.

Technical levels to watch