GBP/JPY jumps back closer to mid-162.00s, bulls flirt with the key 200-day SMA

• GBP/JPY catches fresh bids on Tuesday and climbs closer to the 200-day SMA barrier.
• A positive risk tone, the BoJ’s dovish outlook undermines the JPY and lends support.
• Expectations for more rate hikes by the BoE benefit the GBP and favour bullish traders.

The GBP/JPY cross builds on the previous day's goodish rebound from the 160.00 psychological mark, or a one-month low and gains some follow-through traction on Tuesday. The momentum remains uninterrupted through the mid-European session and lifts spot prices back closer to a technically significant 200-day Simple Moving Average (SMA), around the 163.40 region in the last hour.

A modest recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - undermines the safe-haven Japanese Yen (JPY) and acts as a tailwind for the GBP/JPY cross. The JPY is further pressured by speculations that the Bank of Japan (BoJ) will stick to its dovish stance to support the fragile domestic economy. It is worth mentioning that the incoming BoJ Governor Kazuo Ueda recently stressed the need to maintain the ultra-loose policy settings and said that the central bank isn't seeking a quick move away from a decade of massive easing.

The British Pound, on the other hand, draws support from firming expectations that the Bank of England (BoE) will hike interest rates again later this month. The mixed UK employment details released earlier this Tuesday did little to push back against bets for additional policy tightening by the BoE. In fact, the UK Office for National Statistics reported that the jobless rate held steady at 3.7% during the three months to January and the number of people claiming unemployment-related benefits fell for the second straight month in February, offsetting a slight slowdown in wage growth figures.

That said, a strong pickup in demand for the US Dollar is seen weighing on the Sterling Pound and might keep a lid on any further gains for the GBP/JPY cross, at least for the time being. The aforementioned fundamental backdrop, however, favours bullish traders and suggests that the path of least resistance for spot prices is to the upside. Hence, any meaningful dip might continue to attract fresh buyers and is more likely to remain limited.

Technical levels to watch