GBP/JPY refreshes daily high, bulls looking to build on momentum beyond 157.00 mark

• GBP/JPY gained strong positive traction on Tuesday and has now reversed the overnight losses.
• Receding Omicron fears, BoE rate hike bets continued acting as a tailwind for the British pound.
• Signs of stability in the equity markets undermined the safe-haven JPY and remained supportive.
• Absent relevant market-moving economic releases warrant caution for aggressive bullish traders.

The GBP/JPY cross refreshed daily high during the early European session, with bulls now looking to extend the momentum further beyond the 157.00 round-figure mark.

A combination of supporting factors assisted the GBP/JPY cross to regain positive traction on Tuesday and build on the overnight bounce from sub-156.00 levels, or a four-day low. Hopes that the Omicron outbreak won't derail the UK economy and rising bets for additional rate hikes by the Bank of England continued underpinning the British pound.

In the latest coronavirus-related developments, UK Prime Minister Boris Johnson said on Monday that they are looking at the possibility of reducing the quarantine period to five days from seven. Johnson further added that they are making great progress in seeing off Omicron but noted that the number of cases in the hospital was still increasing.

This comes on the back of a surprise interest rate hike by the BoE in December. Moreover, the markets expect another three to four rate increases in 2022. Apart from this, the emergence of fresh US dollar selling was seen as another factor that acted as a tailwind for the sterling, which, in turn, provided a goodish lift to the GBP/JPY cross.

On the other hand, signs of stability in the equity markets undermined the safe-haven Japanese yen and further contributed to the bid tone surrounding the GBP/JPY cross. It, however, remains to be seen if bulls are able to capitalize on the move or face rejection near the 157.35-40 resistance zone amid absent relevant market moving economic releases.

Technical levels to watch