GBP/JPY Price Analysis: Bulls Eying 157.5 amid Risk-on, Awaits US CPI

• The GBP/JPY recovered on Thursday due to a combination of factors.
• Sterling continued to benefit from the Bank of England’s more hawkish decision last week.
• The JPY’s safe-haven was undermined by positive risk sentiment and provided additional gains.

The GBP/JPY price analysis suggests a bullish scenario ahead of US CPI. However, the Brexit jitters or political updates from the UK may affect. During the European session, the GBP/JPY cross surged to new daily highs of 156.65-156.70.

The GBP/JPY pair, which had pulled back from a three-week high the previous day, attracted fresh buying on Thursday. Last week, the Bank of England’s more hawkish decision continued to support the pound. In contrast, the generally positive sentiment in the equity markets undermined the Japanese yen’s position as a safe haven and pushed the cross higher.

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Interest rates increased by 25 basis points to 0.50% after the Bank of England raised them by 25 basis points. The MPC’s first consecutive rate hike since 2004 was aided by a more aggressive vote split in which four of the nine members backed a 50-basis point increase in borrowing costs. The pound rallied as a result, and support for the pair of GBP/JPY was extended.

However, a new tension over Northern Ireland’s Brexit protocol might discourage traders and dampen significant gains. In addition, investors may be holding off until Friday, when key UK macroeconomic data, including a preliminary fourth-quarter GDP report, will be released. Bullish traders should therefore exercise caution and position themselves for further gains.

GBP/JPY price technical analysis: Bulls aiming higher

The GBP/JPY price stays well bid near the daily highs of 156.70 area. The cross manages to stay above the 20-period SMA, indicating the further potential for the gains. The next strong hurdle lies around the key supply zone around 157.50-70, almost a hundred pips away from current prices.

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However, the volume data is not supportive of the bullish price action. The reason is an upthrust bar with a high volume followed by a minor upside corrective wave with decreasing volume. It indicates a shallow upside attempt that may turn into a bearish reversal sooner or later. The average daily range is 61% which indicates high volatility.

The GBP/JPY cross is expected to stay under the 157.50-70 supply area, while the downside limit could be around the horizontal level of 156.00.