GBP/JPY finds decent support near 200-DMA, climbs back above 154.00 mark

• GBP/JPY attracted dip-buying near 200-DMA on Tuesday and turned positive for the third straight day.
• Upbeat UK jobs report benefitted the British pound and extended support amid BoE rate hike bets.
• Hope for diplomacy in Ukraine undermined the safe-haven JPY and remained supportive of the move.

The GBP/JPY cross recovered nearly 90 pips from the daily swing low and climbed back above the 154.00 mark during the mid-European session.

Following an intraday pullback from the vicinity of mid-154.00s, the GBP/JPY cross attracted some dip-buying near the 200-day SMA on Tuesday and turned positive for the fourth successive day. This also marked the fifth day of an uptick in the previous six and might have set the stage for an extension of the recent goodish rebound from sub-151.00 levels, or the YTD low touched last week.

The British pound drew support from upbeat UK employment details, which reaffirmed expectations that the Bank of England will hike interest rates at its policy meeting on Thursday. In fact, the UK Office for National Statistics (ONS) reported that the jobless rate fell to 3.9% in January. Adding to this, the number of people claiming unemployment-related benefits fell by 48.1K in February.

On the other hand, hopes for a diplomatic solution to end the war in Ukraine weighed on traditional safe-haven assets and capped the intraday gains for the Japanese yen. Apart from this, expectations that the Bank of Japan (BoJ) will maintain the current accommodative policy stance at its meeting on Friday undermined the JPY. This further acted as a tailwind for the GBP/JPY cross.

Given the overnight move back above a technically significant 200-DMA, the emergence of fresh buying on Tuesday supports prospects for a further near-term appreciating move. Some follow-through buying beyond the daily peak, around mid-154.00s, will add credence and validate the near-term constructive outlook. This would allow the GBP/JPY cross to aim to reclaim the key 155.00 psychological mark.

That said, traders might refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the key central bank event risk. Both the BoE and the BoJ are scheduled to announce their policy decision on Thursday and Friday, respectively. This, along with fresh developments surrounding the Russia-Ukraine saga, should provide a fresh directional impetus to the GBP/JPY cross.

Technical levels to watch