GBP/JPY gained some positive traction on Wednesday amid a weaker JPY. Brexit jitters, dovish BoE may cap gains amid cautious sentiment in markets.

The GBP/JPY pair edged higher through the early European session and climbed to fresh daily tops, around the 153.35 regions in the last hour.

After holding on to the 100-day SMA support, the GBP/JPY pair attracted some dip-buying on Wednesday and reversed some of the previous day’s losses.

The gains were exclusively sponsored by the emergence of some selling around the Japanese yen, although a combination of factors capped the pair’s significant gains.

The generally weaker tone around equity markets might benefit the JPY’s relative safe-haven status versus its UK counterpart.

That, along with concerns that the UK government will trigger Article 16 of the Northern Ireland Protocol, will act as a drag for sterling and further collaborate to limit GBP/JPY gains.

Regardless, last week’s dovish Bank of England decision to keep interest rates steady supports bearish traders and supports prospects for further declines.

Nonetheless, it will still be prudent to wait for a sustained break below the 100-day moving average support, around 152.60, before positioning for an extension of the four-week-old downtrend.

There are no major market-moving UK economic data due for release on Wednesday, leaving the GBP/JPY pair on the cusp of fresh developments regarding Brexit.

Regardless, the broader market risk sentiment should influence the safe-haven demand for the JPY and allow traders to take some short-term opportunities around the pair.

By Antoni

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