The GBP/JPY cross has witnessed a consecutive second-day decline on Thursday, marking the third negative session in the last four days. During the first half of the European session, it touched a two-and-a-half-week low, currently hovering around the mid-185.00s. The pair appears susceptible to further downward movement ahead of the Bank of England‘s (BoE) monetary policy decision scheduled for later in the day.
Anticipation of a potential interest rate cut by the UK central bank in May, coupled with less dovish-inspired USD buying, exerts downward pressure on the British Pound (GBP). In contrast, the Japanese Yen (JPY) maintains support from the Bank of Japan‘s (BoJ) recent hawkish stance and ongoing geopolitical risks. This contributes to the prevailing bearish sentiment surrounding the GBP/JPY cross.
From a technical standpoint, the recent close below the 23.6% Fibonacci retracement level from the January rally signals a bearish trigger. Additionally, daily chart oscillators dipping into negative territory suggest a path of least resistance to the downside. A potential slide towards testing the 38.2% Fibonacci level, approximately around the psychological mark of 185.00, is deemed likely.
Should the pair convincingly break below this level, it sets the stage for an extension of the recent pullback from around 189.00 or last month’s highest level since August 2015. The GBP/JPY cross might accelerate its decline towards the 184.50 intermediate support before reaching sub-184.00 levels, marked by the confluence region of the 100-day Simple Moving Average (SMA) and the 50% Fibonacci level.
Conversely, the 186.00 round figure acts as an immediate hurdle, followed by the 23.6% Fibonacci level breakpoint around 186.45-186.50. A sustained strength beyond this level suggests the correction has run its course, potentially shifting the near-term bias in favor of bullish traders. Subsequent upward movement could propel the GBP/JPY cross beyond the 187.00 mark towards the 187.40 hurdle.
