GBP/JPY keeps the red around 183.00, defends 100-day SMA support ahead of BoE

• GBP/JPY drifts lower for the second straight day, though the downside remains limited.
• Intervention fears boost the JPY and turn out to be a key factor weighing on the cross.
• The BoJ’s dovish stance and a positive risk tone cap any meaningful gains for the JPY.
• Traders also seem reluctant to place aggressive bets ahead of the crucial BoE decision.

The GBP/JPY cross remains under some selling pressure for the second successive day on Thursday and drops to the 182.70 support,  representing the 100-day Simple Moving Averages (SMA), during the early part of the European session. Spot prices, however, manage to recover a few pips in the last hour and currently trade around the 183.00 round figure, down less than 0.20% for the day, as traders keenly await the outcome of the Bank of England (BoE) policy meeting.

The broader market consensus is that the UK central bank will maintain the status quo for the second successive time amid signs of an economic slowdown and easing inflationary pressures. Hence, the focus will remain on the accompanying policy statement and the Monetary Policy Committee (MPC) vote split, which will influence expectations about future rate decisions and play a key role in influencing the British Pound (GBP).  In the meantime, speculations that Japanese authorities will intervene in the FX market to combat a sustained depreciation in the domestic currency might continue to weigh on the GBP/JPY cross.

Any meaningful upside for the Japanese Yen (JPY), however, still seems elusive in the wake of more dovish signals from the Bank of Japan (BoJ) earlier this week. The Japanese central bank reiterated its pledge to keep monetary policy ultra-loose until sustained achievement of the 2% price target comes into sight. Moreover, a minor change in its yield curve control (YCC) policy pointed to a slow move towards exiting the decade-long accommodative regime. Apart from this, the risk-on mood – as depicted by a positive tone around the equity markets – could undermine the JPY and lend support to the GBP/JPY cross.

Hence, it will be prudent to wait for a sustained break and acceptance below the aforementioned confluence support before confirming that this week's goodish bounce from sub-181.00 levels, or the lowest level since October 5 has run out of steam. On the flip side, bullish traders need to wait for some follow-through buying beyond the 183.55 area, or the daily swing high, before placing fresh bets and positioning for any further gains.

Technical levels to watch