GBP/JPY pares intraday losses, finds decent support ahead of 156.00 mark

• GBP/JPY witnessed aggressive selling on Thursday and moved further away from a multi-month high.
• The risk-off impulse benefitted the safe-haven JPY and was seen as a key factor exerting pressure.
• A stronger USD weighed on the British pound and further contributed to the intraday selling bias.

The GBP/JPY cross maintained its heavily offered tone through the first half of the European session, albeit has recovered a few pips from the daily low and was last seen trading around the 156.60-65 area.

The cross extended the previous day's retracement slide from the 157.75 area, or the highest level since October 26 and witnessed aggressive selling on Thursday amid the risk-off impulse. Investors turned risk-averse on Wednesday in reaction to surprisingly hawkish FOMC meeting minutes. This, along with worries about the rapid spread of the Omicron variant weighed on investors' sentiment, benefitted the safe-haven Japanese yen and exerted pressure on the GBP/JPY cross.

Meanwhile, a big shift in the Fed's policy outlook continued acting as a tailwind for the US dollar and weighed on the British pound. This was seen as another factor that prompted some long-unwinding around the GBP/JPY cross amid the continuous rise in new COVID-19 cases in the United Kingdom. That said, hopes that the Omicron outbreak won't derail the UK economy and rising bets for a further policy tightening by the Bank of England helped limit deeper losses for the sterling.

On the economic data front, the UK Services PMI was finalized at 53.6 in December as against 53.2 estimated. The combination of factors held back traders from positioning from any further downfall and assisted the GBP/JPY cross to find decent support ahead of the 156.00 mark. It, however, remains to be seen if bulls are able to regain control or refrain from placing fresh bets as the focus shifts back to developments surrounding the coronavirus saga.

Technical levels to watch