GBP/JPY accelerates the intraday decline, drops to fresh daily low near 162.00 mark

• GBP/JPY came under fresh selling pressure on Friday and was pressured by a combination of factors.
• Reviving safe-haven demand boosted the JPY and triggered the initial leg of the intraday downfall.
• Domestic issues continued undermining the British pound and also contributed to the selling bias.

The GBP/JPY cross witnessed an intraday turnaround from the vicinity of the 164.00 mark on Friday and has now erased a major part of the previous day's gains. Spot prices continued losing ground through the early European session and dropped to a fresh daily low, around the 162.00 round figure in the last hour.

The Japanese yen drew haven flows on Friday after former Japanese Prime Minister Shinzo Abe was shot while delivering a speech in the western city of Nara. This, along with the emergence of fresh selling around the British pound, exerted downward pressure on the GBP/JPY cross on the last day of the week.

The overnight market reaction to UK Prime Minister Boris Johnson's resignation turned out to be short-lived as his departure was almost a certainty and largely priced in by markets. Furthermore, Brexit woes, along with expectations for a less hawkish Bank of England, acted as a headwind for sterling.

Investors remain concerned that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union amid the cost of living crisis. Adding to this, growing recession fears could force the BoE to adopt a gradual approach toward raising interest rates.

The fundamental backdrop supports prospects for the resumption of a nearly three-week-old downtrend. That said, repeated bounces from the 200-day SMA warrant caution for bearish traders amid a big divergence in the monetary policy stance adopted by the Bank of Japan and other major central banks.

Technical levels to watch