GBP/JPY trims a part of strong intraday gains to multi-year top, holds above 163.00 mark

• GBP/JPY rallied to a fresh multi-year peak in reaction to the BoJ’s intervention to curb rising yields.
• Hopes for diplomacy in Ukraine further undermined the safe-haven JPY and remained supportive.
• Extremely overbought conditions prompted profit-taking ahead of BoE Governor Bailey’s speech.

The GBP/JPY cross quickly retreated nearly 150 pips from the multi-year peak touched during the early European session, albeit has managed to hold its neck above the 163.00 mark. The cross was last seen trading around the 163.25-163.30 region, still up over 1.5% for the day.

The cross caught aggressive bids on the first day of a new week and rallied nearly 400 pips from the daily low after the Bank of Japan (BoJ) steeped in to arrest the continuous rise in yields. In fact, the BoJ made two offers in a single day to buy unlimited amounts of 10-year Japanese government bonds (JGBs) to protect the 0.25% tolerance ceiling under its yield curve control policy.

Apart from this, a generally positive risk tone weighed heavily on the safe-haven Japanese yen and provided a strong lift to the GBP/JPY cross. Ukrainian President Volodymyr Zelensky said on Sunday that they are prepared to adopt a neutral status as part of a peace deal with Russia. This raised hopes for a diplomatic solution to end the war in Ukraine and boosted investors' confidence.

The sharp intraday momentum took along some trading stops placed around the 162.00 round-figure mark and pushed spot prices to the highest level since May 2016. That said, extremely overbought conditions 
held back bulls from placing fresh bets, instead prompted some profit-taking around the 164.60-164.65 region. This, in turn, led to the GBP/JPY pair's sharp intraday pullback from the daily swing high.

In the absence of any major market-moving economic releases, investors now look forward to the Bank of England Governor Anders Bailey's speech for some impetus. Traders will further take cues from fresh developments surrounding the Russia-Ukraine saga. This, along with the market risk sentiment, will influence the safe-haven JPY and produce some trading opportunities around the GBP/JPY cross.

Technical levels to watch