GBP/JPY slides below 160.00 as Yen cheers mixed sentiment, BOJ action

• GBP/JPY takes offers to refresh intraday low, extends the previous day’s pullback from one-week high.
• BOJ announced the third day of bond market moves, keeps JPY on the front foot.
• Mixed headlines surrounding China, fears of risk-negative announcements from UK PM Sunak also weigh on prices.
• Yields struggle for clear directions and should be eyed for fresh impulse.

GBP/JPY renews intraday low around 159.70 as bears keep the reins for the second consecutive day on early Friday.

The cross-currency pair’s latest weakness could be linked to the broad-based strength of the Japanese Yen (JPY), as well as fears emanating from the UK, amid a sluggish morning session.

It’s worth noting that the Bank of Japan’s (BOJ) third consecutive day of bond market action joins the mixed sentiment to keep the Yen as the market’s favorite.

That said, pessimism surrounding China’s Covid conditions and the Ukraine-Russia tussles joining the global recession woes to weigh on the sentiment. Alternatively, the hopes of the peak in the virus numbers in China and the discovery of an anti-Covid pill joins the chatters of no economic slowdown in the US and Europe to keep the markets positive. Also likely to defend the optimists is the US government funding bill worth $1.7 trillion for the fiscal year 2023.

The Times’ news suggesting UK Prime Minister’s readiness for halving financial support on energy bills for businesses, amid concerns about the cost, also seemed to have exerted downside pressure on the GBP/JPY prices. “The report comes after British public borrowing during last month hit its highest for any November on record, reflecting the mounting cost of energy subsidies, debt interest and the reversal of an increase in payroll taxes,” per the news.

Against this backdrop, US 10-year Treasury yields fade the previous day’s pullback from the six-week high by taking rounds to 3.8% while the S&P 500 Futures print mild losses around 3,865 despite Wall Street’s positive closing.

To sum up, the market’s rush toward risk safety and hopes of a hawkish move in 2023 by the BOJ seems to keep the JPY on the front foot and hence the GBP/JPY bears are likely to keep the reins amid a light calendar through the year-end.

Technical analysis

GBP/JPY bears approach 159.60 support, comprising the one-week-old ascending trend line, after reversing from a fortnight-long resistance line, close to 161.00 by the press time. That said, bearish MACD signals suggest further downside of the cross-currency pair.