GBP/JPY hovers around mid-153.00s, bulls managed to defend 200-day SMA

• GBP/JPY was seen consolidating its recent sharp decline to a one-month low.
• The UK political crisis continued weighing on sterling and acted as a headwind.
• A positive risk tone undermined the safe-haven JPY and extended some support.

The GBP/JPY cross remained on the defensive through the early European session, albeit has managed to rebound a few pips from daily low and was last seen trading around mid-153.00s.

The cross seesawed between tepid gains/minor losses on Tuesday and consolidated its recent sharp decline to a one-month low. Bulls, so far, have managed to defend the very important 200-day SMA support, though any meaningful recovery still seems elusive amid the recent political development in the United Kingdom.

In fact, UK Prime Minister Boris Johnson was dragged into the controversy over a series of alleged lockdown-busting parties in Downing Street. According to sources, No 10 police has given 'extremely damning' party gate evidence to Sue Gray – the senior civil servant who has been tasked with the official inquiry.

The source further added that “if Boris Johnson is still Prime Minister by the end of the week, I’d be very surprised.” Adding to this, the incoming disappointing UK macro data, including the latest PMI prints released on Monday, continued undermining the British pound and acted as a headwind for the GBP/JPY cross.

That said, expectations that the Bank of England will hike interest rates further at the upcoming policy meeting extended some support to sterling. Apart from this, a positive opening in the European equity markets dented demand for the safe-haven Japanese yen and helped limit losses for the GBP/JPY cross, at least for now.

Moving ahead, there isn't any major market-moving economic data due for release from the UK. Hence, the UK political news will play a key role in influencing the GBP. Apart from this, the broader market risk sentiment will be looked upon for some short-term trading opportunities around the GBP/JPY cross.

Technical levels to watch