GBP/JPY struggles at 156.50 amid risk-on market sentiment, after BoJ meeting

• The British pound recovered from Wednesday’s losses, but the upside move was capped due to a lack of follow-through.
• The market sentiment is upbeat, boosting risk-sensitive currencies except for the GBP.
• GBP/JPY: Tilted to the upside from a technical perspective, but price action reflects exhaustion in the recent upside move.

The GBP/JPY edges up during the New York session, trading at 156.55, up 0.07% at the time of writing. Positive market sentiment surrounds the financial markets, with US stock indices rising between 0.37% and almost 1%. Furthermore, bond yields are rising during the day as more central banks become aware that the “transitory” thesis appears to wane.

On the subject mentioned above, the European Central Bank (ECB) President Christine Lagarde said that higher inflation might be around for longer than expected. However, the bank estimates prices will start moderating in 2022.

On Thursday, earlier in the Asian session, the Bank of Japan (BoJ) held its monetary policy decision. The BoJ kept interest rates at -0.10% as expected while maintaining the Yield Curve Control (YCC) in an 8-1 vote, with member Kataoka dissenting on the subject.

There was no follow-through to the BoJ announcement as most Japanese yen pairs remained at familiar levels.

On Friday, the Japanese economic docket will feature the Tokyo Consumer Price Index figures. Furthermore, employment figures with the Jobs / Applicants Ratio and Unemployment Rate will offer some insights to GBP/JPY traders about the Japanese economy.

GBP/JPY Price Forecast: Technical Outlook

Weekly chart

The weekly chart depicts the GBP/JPY pair is in a solid upward trend portrayed by rising slope weekly simple moving averages (WSMA’s) located beneath the spot price, alongside a test of the February 2, 2018, resistance level at 156.61. Since July, the cross-currency has appreciated 6.50%, and the 100-WSMA is just crossing over the 200-WSMA, adding another bullish sign to the previously mentioned hints.

Furthermore, an upward slope trendline that travels from March 2020 lows under September 2020 lows was unsuccessfully tested by the GBP/JPY pair, which bounced off at 150.00, rallying over 700 pips until finally settling at current levels.

Hence, the pair could be headed towards the upside. However, the lack of recent price action above the 156.00 threshold leaves June 24, 2016, swing highs around 159.20 as the next resistance level.