GBP/JPY sticks to gains near daily top, around mid-150.00s

• GBP/JPY regained traction on Tuesday amid a strong pickup in demand for the British pound.
• Omicron fears extended some support to the safe-haven JPY and might cap gains for the pair.
• Reduced BoE rate hike bets also warrant some caution before placing aggressive bullish bets.

The GBP/JPY cross maintained its bid tone through the mid-European session and was last seen hovering near the daily tops, around mid-150.00s.

Following the previous day's two-way price moves, the GBP/JPY cross attracted fresh buying on Tuesday and was supported by a goodish pickup in demand for the British pound. Against the backdrop of Upbeat UK employment data, a modest US dollar pullback provided a goodish lift to the sterling. Apart from this, signs of stability in the equity markets undermined the safe-haven Japanese yen and contributed to the pair's intraday move up.

Reports that two doses of Pfizer-BioNTech vaccine give 70% protection against the Omicron variant boosted investors' confidence. That said, concerns about the potential economic fallout from the spread of the new variant and the imposition of fresh restrictions in Europe and Asia kept a lid on any optimistic move in the markets. This, in turn, warrants some caution before positioning for any further appreciating move.

Apart from this, diminishing odds for an imminent interest rate hike by the Bank of England (BoE) in December, along with Brexit uncertainties should cap gains for the GBP/JPY cross. Investors might also refrain from placing aggressive bets ahead of the key central bank event risks. The BoE will announce its monetary policy decision on Thursday and the Bank of Japan meetings is scheduled on Friday. This further warrants some caution before positioning for any further appreciating move.

Even from a technical perspective, the GBP/JPY cross has been oscillating in a range over the past one week or so. This marks a consolidation phase, making it prudent to wait for a convincing break in either direction before confirming that the pair has bottomed out in the near term.

Technical levels to watch