GBP/JPY continues to trade with positive bias, though struggling to get back above 155.00 for now

• GBP/JPY continued to trade with a positive bias on Tuesday, though was unable to hold above 155.00.
• GBP/JPY continues to move higher within a short-term bullish trend channel.
• If risk appetite is able to improve in February, yen weakness could propel the pair towards recent highs near 158.00.

GBP/JPY continues to trade with an upside bias on Tuesday against a backdrop of favourable risk appetite, though the pair has been unable to hold above the 155.00 level and in recent trade slipped back below it. A strong start to the year for house price growth according to data from British lender Nationwide, coupled with confirmation that manufacturing PMI had risen to its highest since in six months in January helped keep sterling underpinned. Meanwhile, market commentators also cited investor speculation that the BoE might announce its quantitative tightening plans alongside a 25bps rate hike on Thursday as supportive for the pound.

Ahead of Thursday’s key monetary policy announcement, GBP/JPY continues to move higher within a short-term bullish trend channel that has been guiding the price action for nearly the last week. If the pair can surpass the 155.00 level, its faces solid resistance in the 155.40s area, and the area it failed to get above at the end of last week. A break above this area (perhaps as a result of BoE tightening bets) would open the door to a move above 156.00 and on towards resistance in the 157.00 area. Meanwhile, if February proves to be a better month for risk appetite than last, yen weakness as investor demand for more risk-sensitive assets rises could propel the pair back towards January and Q4 2021 highs in the 158.00 area.